Your most frequent EOFY questions, answered
Taxes might be one of two things that are certain in the world of finance but this doesn’t mean there’s ever a guarantee about them.
The looming approach of the end of financial year (EOFY) means the majority of small-business owners will be seeking the aid of an experienced accountant to ensure their affairs are in order. To make the most of your time together, we’ve talked to two renowned small business accountants who’ve given their top queries regarding EOFY with their clients in order to help you get a head-start.
Q. How do I claim my car?
There are many ways to do it. One way to do it is to claim it on an allowance for mileage – this is a reimbursement for your business and is not a tax deductible benefit for your personal income.
There are rules for keeping a logbook. However, if there is a record of your meetings and activities through your email, that could be sufficient to justify your claim.
Q. I’ve been earning an amount of money. Would it be worth purchasing an automobile at the end of the year in order to avoid tax?
If you decide to purchase a car you should make the purchase about cash flow instead of tax. You’ll not gain any benefit from buying a car just at the end of the year you’ve been trading. It is better to consider your cash flow prior to the starting of your year to increase the depreciation allowance and interest.
Q. I’ve got no cash. How am I going to pay my tax bill?
You’ll need to enter into some kind of payment agreement. There are several options to accomplish this. You can call the tax department to create a payment plan but the interest is charged and there are penalties if you miss your payment.
Another option is that you can approach companies that offer tax pooling. They can fund your tax payment by pooling them and the interest rate is often significantly lower than those offered by the tax office. It’s also more flexible.
A small business loan is another effective option.
Q. What tax do I be required to pay?
There is no easy, one-size-fits-all answer to this because it differs greatly based on your business structure and the tax rates you’re paying and the sector you operate in.
We typically recommend that clients save between 20 and 25% of their turnover to help cover tax on income or GST Accident Compensation Corporation (ACC) taxes and any other little surprises during the year.
Q. Do I need to be GST registered for the coming financial year?
The answer is different 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 if you’re expecting to cross the threshold or engage in an activity that requires GST will be contained in your industry costs as a standard.
Q. Do I need to do a stocktake?
The simple response is yes. There’s an exemption that permits those with lower values of stock to just make an estimate of the inventory they have on hand. But if you’re operating a business that sells items, it’s smart to know precisely how many items you have on hand to sell.
The process also flags SLOBS (slow-moving and out-of-date inventory) which allows you to dispose of the item and not purchase it again, thus 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 lets you easily track the numbers of a profit and loss and file a return with Tax Department. However, it doesn’t tell the tax benefits you can’t claim, and it doesn’t take a closer look at your overall financial situation.
Are you looking to make sure that everything is in order this tax season? Talk to your accountant about making sure you’ve checked all the right boxes.
