Your most frequent end of financial year questions, answered

Taxes are perhaps one of two things that are certain in this world, but that doesn’t mean there is any guarantee that they will be paid.

The approaching final year of financial reporting (EOFY) means many small business owners will need the services of a professional accountant to ensure they have their finances in good working order. To help you make the most of the time you spend with them, we’ve talked to two top small-business accountants who discussed their most frequent EOFY questions from clients, so you can get a head-start.

Q. How can I claim for my car?

There’s more than one method. One option would be to claim it as the kilometre allowance, which is a reimbursement to your company and does not have income ramifications for individuals.

There are requirements for a logbook. But, if you’ve got an inventory of your events and movements through your email, it could be sufficient to support your claim.

Q. I’ve been earning some decent money. Do I need to buy a vehicle at the end of the year in order to avoid tax?

When you buy a vehicle it should be about cash flow instead of tax. You won’t gain a significant advantage by purchasing a vehicle towards the close of your trading year. You’re better off assessing your cash flow at time of year’s beginning in order to maximize your allowance for depreciation and any interest.

Q. I’ve got no cash. How am I going to pay my tax bill?

You’re going to have to sign a type of arrangement for payment. There are many ways to go about it. You can contact the tax department and arrange a payment plan but you will be charged interest and penalties are imposed for late payments.

There is another option: you could approach businesses that provide tax pooling. They’re able to pay for tax obligations through a pooling arrangement , and the interest rate is usually a lot less than taxes paid by tax departments. They are also much more flexible.

A small-business loan is another helpful option.

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

There is no quick solution that is universally applicable because it differs greatly depending on the structure of your business and the tax you are legally obligated to pay, and the type of business you operate in.

We generally suggest that clients set aside between 20 and 25 percent of their turnover to help cover income tax as well as GST, Accident Compensation Corporation (ACC) taxes and any other little surprises throughout the year.

Q. Do I have to be GST-registered in the coming year?

Also, the answer will differ for each business owner based on their industry, the market they want to target and turnover.

You are free to sign up in the event that you’re planning to cross the threshold, or are engaging in an activity in which GST will be contained in the industry prices as a rule.

Q. Do I have to conduct an inventory?

The simple solution is yes. There is an exemption which allows people with low value of stock to simply make an estimate of the inventory they have in their inventory. However, if you are in the business of selling products, it is important to know exactly how many items you have in your inventory to sell.

The process also flags SLOBS (slow-moving and out-of-date inventory) which allows you to dispose of 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, how do you go about doing it correctly? Today’s software makes it easy to run profits and losses, and then file a tax return with your tax authorities. It doesn’t inform the tax benefits you cannot claim, and doesn’t take a closer examine your overall financial position.

Are you looking to make sure that everything is in order this tax time? Speak to your accountant about ticking all the right boxes.