Your most frequent EOFY questions, answered

Taxes could be one of only two certainties in life, but it doesn’t mean that there is any guarantee that they will be paid.

The approaching closing of the financial year (EOFY) implies that numerous small business owners will need the help of a professional accountant to ensure that they have their finances in good order. In order to help you make the most of the time you spend with them, we’ve spoken with two top small business accountants, who have discussed their most frequent EOFY questions from clients in order to help you get an early start.

Q. How can I claim my car?

There are many ways to do it. One option is to claim it as an allowance for kilometres – which covers the expense to your business , and is not a tax deductible benefit for you as an individual.

There are certain requirements for a logbook. But, if you’ve got an account of your appointments and activities through your email, it could be sufficient to justify your claim.

Q. I’ve made some decent money. Do I need to buy an automobile at the end of the calendar year to lower tax?

When you buy a vehicle it should be about cash flow and not tax. You don’t get a real benefit from buying a car right at the end of your year as a trader. You’re better off assessing your cash flow at start of each year in order to increase the depreciation allowance and interest.

Q. I’ve got no cash. How am I going to cover my taxes?

You’ll have to enter into some kind of payment arrangement. There are a few options to accomplish this. Contact the tax department to set up a payment plan but the interest is charged and penalties are imposed when you don’t make your payment.

The alternative is that you could approach businesses that provide tax pooling. They’re able fund tax obligations through a pooling arrangement and the interest rate can be lower than that of that of the department responsible for tax. It’s also a lot more flexible.

A small business loan can be a helpful option.

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

There is no simple answer that can be standardized since it differs widely in relation to the business structure you have as well as the taxes you’re required to pay and the field you operate in.

We typically recommend that clients save around 20-25% of their annual turnover to with taxation as well as GST, Accident Compensation Corporation (ACC) charges and other small surprises throughout the year.

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

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

You are able to register on your own for GST if you’re anticipating to reach the threshold, or are engaging in any activity where GST includes in the industry prices as a rule.

Q. Do I need to perform an inventory?

The simple response is yes. There’s an exemption that allows those with low values of stock to simply guess the quantity they have in their inventory. However, if you are operating a business that sells items, it’s smart to know precisely how many items you have on hand to sell.

This also helps identify SLOBS (slow-moving and obsolete stock) and allows you to get rid of it without having to purchase it once more, which will improve your cash flow.

Q. Can I do my EOFY taxes myself?

Yes, you can however, how do you go about doing it right? Software available today can make it simple to track the numbers of a profit and loss and submit a tax return to the tax department. However, it does not tell you what you can and should not claim, and doesn’t take a closer examine your overall financial position.

Do you want to do it right this tax time? Speak to your accountant about making sure you’ve checked all the right boxes.