Your most popular EOFY questions, answered

Taxes might be one of the two most important things in life However, it doesn’t mean that there is always certainty around them.

The looming approach of the end of financial year (EOFY) will mean that most small-scale business owners will be enlisting the aid of an experienced accountant to make sure their affairs are in good working order. In order to help you make the most of the time you spend with them, we’ve spoken to two renowned small business accountants who shared their most common EOFY questions from clients and give you an early start.

Q. How do I claim my car?

There’s more than one method. One method would be to claim it on the kilometre allowance, which reimburses the cost to your business and doesn’t have any income implications for individuals.

There are some requirements for a logbook. However, if you have the log of your meetings and movements through your email, it could be sufficient to justify your claim.

Q. I’ve been earning quite a bit of money. Should I consider buying a vehicle at the end of the calendar year to lower tax?

When you purchase a vehicle your decision should be about cash flow, not tax. You’ll not gain any benefit from buying a car towards the close of your year as a trader. You should consider your cash flow at starting of your year to maximize the amount of depreciation allowance as well as any interest.

Q. I’ve got no cash. How can I cover my taxes?

You’ll need to enter into some kind of arrangement for payment. There are a few ways to go about it. You can call the tax department to arrange a payment plan however, interest will be charged as well as penalties when you don’t make your payment.

The alternative is that you might approach businesses offering tax pooling. They can fund your tax payment via a pooling agreement and the interest rate is often much lower than taxes paid by tax departments. It’s also a lot more flexible.

A small-business loan is another beneficial alternative.

Q. What tax do I have to pay?

There is no simple answer that can be standardized because it differs greatly according to your business structure and the tax rates you’re paying and the sector that you are in.

We generally recommend that clients save around 20-25% of their earnings to with taxation as well as GST, Accident Compensation Corporation (ACC) taxes and any other little surprises during the year.

Q. Do I have to be GST-registered in the coming year?

The answer is different for every business owner based on their industry, the market they want to target and turnover.

It is possible to register for GST on your own when you’re likely to exceed the threshold or are undertaking an activity that requires GST can be included into your industry costs as a standard.

Q. Do I need to do an inventory?

The short solution is yes. There is an exemption which lets those with low valuations of stock to simply estimate the amount of stock they have in their inventory. However, if you are in the business of selling items, it’s smart to know precisely how many items you have on hand to sell.

This method also detects SLOBS (slow-moving and obsolete stocks) to allow you to clear the item and not purchase it once more, which will improve your cash flow.

Q. Can I do my EOFY taxes myself?

Yes, you can but can you do it correctly? Software available today lets you easily track a profit and loss, and file a return with Tax Department. But it doesn’t tell you what you may and can’t claim, and it doesn’t take a closer examine your overall financial position.

Do you want to be sure you are doing it right this tax season? Consult your accountant about making sure you’ve checked all the right boxes.