The most frequent end of financial year questions, and answers

Taxes are perhaps one of the two most important things in the world of finance, but that doesn’t mean there is always certainty around them.

The imminent final year of financial reporting (EOFY) implies that many small business owners will seek the services of a professional accountant to ensure that all their financial affairs are in order. To make the most of your time with them, we’ve spoken to two renowned small business accountants, who have given their top queries regarding EOFY with their clients to give you a head-start.

Q. How can I claim my car?

There’s many ways to. One way to do it would be to claim it as a kilometre allowance – that reimburses the cost for your business and does not have income ramifications for the individual.

There are some requirements for the keeping of a logbook. However, if you have the log of your meetings and actions via your email, that could be sufficient to justify your claim.

Q. I’ve been earning an amount of money. Would it be worth purchasing a car at the end of the year to save tax?

When you buy a vehicle it should be about cash flow instead of tax. There isn’t any real advantage by purchasing a vehicle right at the end of your year as a trader. You’re better off considering your cash flow at the time of year’s beginning in order to maximise the allowance for depreciation as well as any 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 many ways to do that. You can reach out to the tax department and create a payment plan but you will be charged interest and there are penalties for late payments.

Another option is that you can approach companies that offer tax pooling. They’re able to fund your tax payment via a pooling agreement and the interest rate can be a lot less than the tax department. They are also much more flexible.

A small business loan can be a useful alternative.

Q. What tax do I have to pay?

There is no easy solution that is universally applicable because it differs greatly according to your business structure and the tax you are paying and the sector that you are in.

We typically recommend that clients save between 20 and 25% of their turnover to help cover tax on income and GST, Accident Compensation Corporation (ACC) levies , and any small surprise all through the year.

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

The answer is different for each business owner based on the industry, market and turnover.

You can voluntarily register in the event that you’re planning to cross the threshold or are engaged in an activity where GST will be contained in industry costs as a standard.

Q. Do I have to conduct a stocktake?

The simple answer is yes. There is an exemption which allows people with low value of stock to just make an estimate of the inventory they have in their inventory. If you’re involved in selling products, it is important to know exactly how many things you have to sell.

This also helps identify SLOBS (slow-moving and obsolete inventory) and allows you to get rid of it and not order it once more, which will improve the flow of cash.

Q. Can I do my EOFY taxes myself?

Sure, you can, but will you do it correctly? Today’s software lets you easily track the numbers of a profit and loss and submit a tax return to your tax authorities. But it doesn’t tell you what you are allowed and cannot claim, and isn’t able to take a analysis of your overall financial position.

Want to get it right this tax time? Consult your accountant about checking all the boxes.