Your most frequent end of financial year questions, answered

Taxes may be one of only two certainties in life, but this doesn’t mean there’s always certainty around them.

The approaching final year of financial reporting (EOFY) is a time when the majority of small-business owners will be seeking the aid of an experienced accountant to make sure your affairs are in order. To make the most of your time together, we’ve talked to two renowned small business accountants who have shared their most common client EOFY concerns, so you can get an idea of what to expect.

Q. How can I claim for my car?

There’s more than one way. One way to do it would be to claim it on a kilometre allowance – that will reimburse the cost to your business , and does not impact your income for the individual.

There are rules for keeping a logbook. If you do have an account of your appointments and activities through your email, that may be sufficient to justify your claim.

Q. I’ve been making a fair amount of money. Do I need to buy an automobile at the end of the year in order to avoid tax?

If you decide to purchase a car, the decision should be about cash flow and not tax. You’ll not gain any advantage by purchasing a vehicle just at the end of the year you’ve been trading. You’re better off assessing your cash flow prior to the beginning of the year in order to maximise the allowance for depreciation as well as any interest.

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

You’ll need to enter into some kind of payment arrangement. There are a few ways to go about it. Contact the tax department to create a payment plan but you will be charged interest and penalties are imposed in the event of a late payment.

The alternative is that you might approach businesses offering tax pooling. They’re able fund your tax payments by pooling them and the interest rates are usually lower than that of those offered by the tax office. It’s also more flexible.

A small business loan is a useful option.

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

There is no easy answer that can be standardized 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 that you are in.

We usually recommend that our clients save between 20 and 25% of their annual turnover to cover tax on income as well as GST, Accident Compensation Corporation (ACC) taxes and any other little 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 based on their industry, the market they want to target and turnover.

You are free to sign up for GST if you’re anticipating to reach the threshold or are undertaking an activity in which GST will be contained in the industry prices in the normal course.

Q. Do I need to do a stocktake?

The simple answer is yes. There is an exemption which permits those with lower values of stock to simply estimate the amount of stock they hold. However, if you’re operating a business that sells items, it’s smart to know exactly how many items you have on hand to sell.

The process also flags SLOBS (slow-moving and out-of-date stock) so you can clear it and not order it once more, which will improve your cash flow.

Q. Can I do my EOFY taxes myself?

Yes, you can however, can you do it correctly? The software available today lets you easily track a profit and loss, and then file a tax return with your tax authorities. However, it does not tell you what you can and should not claim, and isn’t able to take a examine your overall financial situation.

Do you want to be sure you are doing it right this tax season? Speak to your accountant about checking all the boxes.