The most common EOFY questions, answered
Taxes might be one of the two most important things in life However, it doesn’t mean that there is always certainty around them.
The nearing final year of financial reporting (EOFY) is a time when many small business owners will seek the aid of an experienced accountant to ensure they have their finances in good order. To make the most of your time working with them, we’ve spoken to two top small-business accountants who provided their most frequently asked client EOFY concerns in order to help you get an advantage.
Q. How can I claim for my car?
There are many ways to do it. One method would be to claim it on the kilometre allowance, which reimburses the cost for your business and does not impact your income for individuals.
There are certain requirements for the keeping of a logbook. However, if you have the log of your meetings as well as your movements via email, it could be enough to back up your claim.
Q. I’ve earned quite a bit of money. Should I consider buying a car at the end of the calendar year to lower 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 by buying a car towards the close of the year you’ve been trading. You’re better off assessing your cash flow at the time of year’s beginning to maximise the allowance for depreciation as well as any interest.
Q. I’ve got no cash. How do I pay my tax bill?
You’ll have to agree to some type of arrangement for payment. There are several ways to go about it. You can contact the tax department to create a payment plan but the interest is charged and penalties are imposed when you don’t make your payment.
There is another option: you may approach companies offering tax pooling. They’re able to fund your tax bills via a pooling agreement and the interest rate is often a lot less than that of the department responsible for tax. It’s also a lot more flexible.
A small business loan can be a useful option.
Q. What is the amount of tax I have to pay?
There isn’t a quick, universal solution to this because it is wildly different based on your business structure, the taxes you are legally obligated to pay, and the type of business you work in.
We generally recommend that clients save between 20 and 25% of their revenue to cover tax on income as well as GST, Accident Compensation Corporation (ACC) levies and any little surprises throughout the year.
Q. Do I need to be GST registered for the following financial year?
It is true that the answer varies for each business owner , based on their industry, the market they want to target and turnover.
You are able to register on your own if you’re expecting to cross the threshold or are undertaking any activity where GST will be contained in the industry prices as a norm.
Q. Do I need to perform an inventory?
The short conclusion is that yes. There is an exemption which allows people with low value of stock to simply estimate the stock they have on hand. However, if you’re involved in selling products, you should be aware of the number of items are available to sell.
This method also detects SLOBS (slow-moving and out-of-date inventory) and allows you to get rid of it and not order it in the future, thereby improving the flow of cash.
Q. Can I do my EOFY taxes myself?
Sure, you can however, can you do it right? Software available today makes it easy to run a profit and loss, and to file a tax return with IRS. It doesn’t inform you what you are allowed and should not claim, and does not take a deeper analysis of your overall financial situation.
Do you want to do it right this tax time? Discuss with your accountant the possibility of checking all the boxes.
