The most common end of financial year questions, and answers

Taxes are perhaps one of the only two guarantees in this world, but this doesn’t mean there’s any guarantee that they will be paid.

The approaching close of the financial year (EOFY) is a time when most small-scale business owners will seek the help of a professional accountant to ensure they have their finances in order. To help you make most of the time you spend with them, we’ve talked to two top small-business accountants who’ve shared their most common EOFY questions from clients and give you an advantage.

Q. How do I claim my car?

There’s more than one method. One way is to claim it as an allowance for kilometres – which will reimburse the cost to your business , and does not impact your income for individuals.

There are some requirements for a logbook. But, if you’ve got a record of your meetings and movements through your email, that can be sufficient to justify your claim.

Q. I’ve made a fair amount of money. Should I consider buying a vehicle at the end of the year to save tax?

When you buy a vehicle your decision should be about cash flow instead of tax. There isn’t any real benefit by buying a car right at the end of your trading year. It is better to consider your cash flow at the time of year’s beginning in order to maximise the allowance for depreciation and any interest.

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

It is necessary to enter into some kind of arrangement to pay. There are several ways to go about it. You can reach out to the tax department and create a payment plan but the interest is charged and there are penalties in the event of a late payment.

You could approach businesses that provide tax pooling. They can fund your tax bills through a pooling arrangement , and the interest rate can be significantly lower than those offered by the tax office. It’s also a lot more flexible.

A small business loan is another beneficial option.

Q. What tax do I have to pay?

There is no quick answer that can be standardized as it varies wildly depending on the structure of your business and the tax rates you’re registered for and the industry you work in.

We usually recommend that our clients set aside between 20 and 25 percent of their earnings to cover tax on income and GST, Accident Compensation Corporation (ACC) taxes and any other little surprises throughout the year.

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

It is true that the answer varies for every business owner based on the industry, market and turnover.

It is possible to register for GST on your own in the event that you’re planning to cross the threshold or engage in an activity that requires GST includes in industry prices as a rule.

Q. Do I require an inventory?

The short solution is yes. There’s an exemption that allows those with low values of stock to simply make an estimate of the inventory they have on hand. However, if you are involved in selling items, it’s smart to be aware of the number of items you have in your inventory to sell.

The process also flags SLOBS (slow-moving and obsolete stocks) so you can clear it without having to purchase it in the future, thereby improving your cash flow.

Q. Can I do my EOFY taxes myself?

Of course you can but can you do it right? The software available today allows you to easily run profits and losses, and file a return with IRS. However, it doesn’t tell you what you can and aren’t claiming, and does not analysis of your overall financial position.

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