The most frequent end of financial year questions, and answers

Taxes may be one of only two certainties in this world however this doesn’t mean that there’s ever a guarantee about them.

The imminent final year of financial reporting (EOFY) will mean that the majority of small-business owners will need the services of a professional accountant to ensure that all their financial affairs are in good working order. To make the most of the time you spend with them, we’ve spoken with two top small business accountants who have given their top EOFY questions from clients and give you an early start.

Q. How do I claim my vehicle?

There’s more than one way. One way would be to claim it as an allowance for mileage – this covers the expense to your business and does not have income ramifications for your personal income.

There are requirements for a logbook. If you do have an inventory of your events as well as your movements via email, it could be enough to back up your claim.

Q. I’ve been making quite a bit of money. Is it worth buying a vehicle at the end of the year to reduce tax?

If you decide to purchase a car it should be about cash flow and not about tax. You won’t gain a significant advantage by purchasing a vehicle right at the end of your year as a trader. It is better to consider your cash flow at the starting of your year to maximise the allowance for depreciation as well as any interest.

Q. I’ve got no cash. How do I pay my tax bill?

You’re going to have to agree to some type of payment agreement. There are a variety of ways to go about it. Contact the tax department to set up a payment plan however, interest will be charged and penalties are imposed in the event of a late payment.

There is another option: you may approach companies offering tax pooling. They’re able to fund your tax bills via a pooling agreement and the interest rates are usually significantly lower than those offered by the tax office. They are also much more flexible.

A small business loan is a beneficial option.

Q. What amount of tax will I be required to pay?

There is no quick solution that is universally applicable since it differs widely in relation to the business structure you have, the taxes you are legally obligated to pay, and the type of business you work in.

We usually recommend that our clients save between 20 and 25% of their annual turnover to cover tax on income, GST, Accident Compensation Corporation (ACC) charges and other small surprises during the year.

Q. Should I be GST registered for the coming financial year?

Again, the answer varies for each business owner depending on industry, target market and turnover.

You can voluntarily register when you’re likely to exceed the threshold or are engaged in an activity that requires GST will be contained in industry costs as a standard.

Q. Do I have to conduct a stocktake?

The short answer is yes. There is an exemption which lets those with low valuations of inventory to estimate the amount of stock they have on hand. But if you’re operating a business that sells products, you should know exactly how many things you have to sell.

This process also identifies SLOBS (slow-moving and obsolete inventory) so you can clear it , and never purchase it in the future, thereby improving your cash flow.

Q. Can I do my EOFY taxes myself?

Sure, you can however, how do you go about doing it right? Software available today makes it easy to run profits and losses, and to file a tax return with the tax department. However, it doesn’t tell you what you are allowed and cannot claim, and isn’t able to take a examine your overall financial position.

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