The most frequent EOFY questions, and answers

Taxes might be one of two things that are certain in the world of finance but it doesn’t mean that there is any guarantee that they will be paid.

The nearing closing of the financial year (EOFY) implies that most small-scale business owners will be seeking the help of a professional accountant to ensure all their financial affairs are in good order. To help you make most of the time you spend with them, we’ve spoken to two top small-business accountants who’ve shared their most common EOFY questions from clients, so you can get an early start.

Q. How do I claim my vehicle?

There’s more than one method. One method would be to claim it on an allowance for kilometres – which will reimburse the cost to your business , and doesn’t have any income implications for you as an individual.

There are certain requirements for the logbook. However, if you have the log of your meetings as well as your movements via email, that can be sufficient to justify your claim.

Q. I’ve earned quite a bit of money. Should I consider buying a car at the end of the year in order to avoid tax?

When you are buying a car you should make the purchase about cash flow and not about tax. You won’t gain a significant advantage by purchasing a vehicle just at the end of your year as a trader. It is better to consider your cash flow at the time of year’s beginning in order to maximize your allowance for depreciation and interest.

Q. I’ve got no cash. How do I cover my taxes?

You’re going to have to enter into some kind of arrangement for payment. There are several methods to achieve this. You can reach out to the tax department and establish a payment schedule but the interest is charged and there are penalties in the event of a late payment.

There is another option: you might approach businesses offering tax pooling. They’re able to fund your tax bills via a pooling agreement and the interest rate is usually lower than that of that of the department responsible for tax. It’s also a lot more flexible.

A small business loan is a helpful option.

Q. What amount of tax will I be required to pay?

There is no simple solution that is universally applicable because it is wildly different depending on the structure of your business and the tax you are registered for and the industry that you are in.

We generally suggest that clients save roughly 20-25% of their revenue to cover income tax and GST, Accident Compensation Corporation (ACC) charges and other small surprises throughout the year.

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

Also, the answer will differ for each business owner based on the industry, market and turnover.

You are free to sign up for GST if you’re anticipating to reach the threshold or engage in an activity in which GST is included in the industry costs as a standard.

Q. Do I require an inventory?

The short solution is yes. There’s an exemption that allows people with low value of stock to simply make an estimate of the inventory they hold. However, if you are in the business of selling items, it’s smart to know exactly how many items you have on hand to sell.

This method also detects SLOBS (slow-moving and out-of-date inventory) and allows you to get rid of it without having to purchase it again, improving the flow of cash.

Q. Can I do my EOFY taxes myself?

You can certainly do it however, how do you go about doing it right? Software available today makes it easy to run an income and loss and to file a tax return with IRS. However, it does not tell you what you can and can’t claim, and it doesn’t take a closer review of your financial position.

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