The most common EOFY questions, and answers

Taxes are perhaps one of two things that are certain in the world of finance, but that doesn’t mean there is always certainty around them.

The nearing end of financial year (EOFY) is a time when many small business owners will seek the aid of an experienced accountant to ensure your affairs are in order. In order to help you make the most of the time you spend together, we’ve talked to two top small-business accountants, who have shared their most common EOFY questions from clients and give you an advantage.

Q. How do I claim my vehicle?

There’s many ways to. One way would be to claim it on an allowance for kilometres – which will reimburse the cost for your business and does not impact your income for individuals.

There are rules for keeping the logbook. However, if you have the log of your meetings and actions via your email, it could be enough to back up your claim.

Q. I’ve been earning an amount of money. Do I need to buy an automobile at the close of the year in order to avoid tax?

If you decide to purchase a car, the decision should be about cash flow and not about tax. You don’t get a real advantage by purchasing a vehicle just at the end of the trading year. You’re better off assessing your cash flow at starting of your year in order to maximize your allowance for depreciation as well as any interest.

Q. I’ve got no cash. How am I going to make my payment for tax?

It is necessary to sign some sort of payment agreement. There are many ways to do that. You can reach out to the tax department to arrange a payment plan but the interest is charged and you will be penalized in the event of a late payment.

The alternative is that you may approach companies offering tax pooling. They’re able to fund your tax payments through a pooling arrangement and the interest rate can be lower than that of those offered by the tax office. They are also much more flexible.

A small business loan is a effective option.

Q. What amount of tax will I have to pay?

There is no quick solution that is universally applicable since it differs widely depending on the structure of your business as well as the taxes you’re legally obligated to pay, and the type of business you operate in.

We generally recommend that clients save around 20-25% of their annual turnover to cover income tax as well as GST, Accident Compensation Corporation (ACC) levies , and any small surprise all through the year.

Q. Do I need to be GST registered for the coming year?

The answer is different for every business owner based on industry, target market and turnover.

You are free to sign up when you’re likely to exceed the threshold or engage in an activity where GST includes in industry prices in the normal course.

Q. Do I need to perform an inventory?

The short solution is yes. There’s an exemption that permits those with lower values of stock to simply guess the quantity they have in their inventory. But if you’re in the business of selling items, it’s smart to know exactly how many items you have on hand to sell.

This method also detects SLOBS (slow-moving and obsolete inventory) and allows you to get rid of it without having to purchase it in the future, thereby improving the flow of cash.

Q. Can I do my EOFY taxes myself?

Yes, you can but can you do it right? The software available today can make it simple to track the numbers of a profit and loss and to file a tax return with the tax department. It doesn’t inform you what you are allowed and can’t claim, and it doesn’t take a closer analysis of your overall financial position.

Want to get it right this tax season? Discuss with your accountant the possibility of ticking all the right boxes.