Your most popular end of financial year questions, answered

Taxes could be one of the two most important things in the world of finance However, this doesn’t mean that there’s always certainty around them.

The looming approach of the closing of the financial year (EOFY) implies that many small business owners will be enlisting the services of a professional accountant to ensure that they have their finances in order. To help you make most of your time together, we’ve talked to two leading small business accountants, who have shared their most common EOFY questions from clients to give you an early start.

Q. How can I claim for my car?

There’s many ways to. One way is to claim it on a kilometre allowance – that covers the expense to your business and is not a tax deductible benefit for your personal income.

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

Q. I’ve been making an amount of money. Should I consider buying an automobile at the end of the year in order to avoid tax?

When you buy a vehicle you should make the purchase about cash flow and not about tax. You don’t get a real advantage from purchasing a vehicle towards the close of your trading year. You’re better off considering your cash flow at beginning of the year to increase the depreciation allowance and any interest.

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

You’re going to have to sign a type of arrangement to pay. There are many methods to achieve this. You can call the tax department to arrange a payment plan but the interest is charged and there are penalties for late payments.

The alternative is that you could approach businesses that provide tax pooling. They’re able to pay for your tax payment through a pooling arrangement and the interest rates are usually significantly lower than the tax department. It’s also more flexible.

A small-business loan is another useful alternative.

Q. How much tax will I be required to pay?

There isn’t a quick, universal solution to this because it differs greatly based on your business structure and the tax you are paying and the sector you work in.

We usually recommend that our clients save between 20 and 25% of their turnover to help with taxation, GST, Accident Compensation Corporation (ACC) levies and any little surprises all through the year.

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

Again, the answer varies for each business owner based on their industry, the market they want to target and turnover.

It is possible to register for GST on your own for GST if you’re anticipating to reach the threshold or engage in an activity that requires GST is included in your industry prices in the normal course.

Q. Do I need to perform an inventory?

The simple solution is yes. There is an exemption which allows people with low value of stock to simply make an estimate of the inventory they hold. But if you’re operating a business that sells things, it’s important to know precisely how many items you have in your inventory to sell.

This method also detects SLOBS (slow-moving and out-of-date inventory) to allow you to clear 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 correctly? The 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. But it doesn’t tell the tax benefits you cannot claim, and does not take a deeper look at your overall financial position.

Do you want to do it right this tax season? Speak to your accountant about ticking all the right boxes.