Your most popular EOFY questions, answered
Taxes may be one of two things that are certain in the world of finance but this doesn’t mean that there’s never a certainty about them.
The looming approach of the final year of financial reporting (EOFY) is a time when the majority of small-business owners will be enlisting the help of a professional accountant to ensure your affairs are in the right place. To help you make most of the time you spend with them, we’ve talked to two renowned small business accountants who’ve shared their most common questions about EOFY from their clients in order to help you get an idea of what to expect.
Q. What can I do to claim my vehicle?
There’s more than one way. One way is to claim it on an allowance for mileage – this will reimburse the cost to your business and does not impact your income for you as an individual.
There are some requirements for an account book. If you do have an inventory of your events as well as your movements via email, it could be sufficient to support your claim.
Q. I’ve earned an amount of money. Is it worth buying a vehicle at the end of the year to reduce tax?
When you are buying a car, the decision should be about cash flow and not about tax. You won’t gain a significant benefit from buying a car right at the end of the trading year. It is better to consider your cash flow at time of year’s beginning in order to maximize your allowance for depreciation and interest.
Q. I’ve got no cash. How am I going to be able to pay for my tax bills?
You’re going to have to sign a type of payment agreement. There are a variety of ways to go about it. You can call the tax department and establish a payment schedule however, interest will be charged and you will be penalized in the event of a late payment.
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 is usually a lot less than taxes paid by tax departments. They are also much more flexible.
A small business loan is another beneficial alternative.
Q. What amount of tax will I be required to pay?
There is no easy answer that can be standardized because it is wildly different according to your business structure as well as the taxes you’re registered for and the industry you work in.
We usually recommend that our clients set aside between 20 and 25 percent of their earnings to pay for tax on income as well as GST, Accident Compensation Corporation (ACC) taxes and any other little surprises all through the year.
Q. Do I have to be GST-registered in the following financial year?
The answer is different for each business owner depending on the type of business, the target market and turnover.
You can voluntarily register in the event that you’re planning to cross the threshold or engage in an activity that requires GST is included in your industry prices as a rule.
Q. Do I need to perform a stocktake?
The short response is yes. There’s an exemption that allows people with low value of stock to just make an estimate of the inventory they have available. If you’re involved in selling things, it’s important to know exactly how many items are available to sell.
This method also detects SLOBS (slow-moving and out-of-date stock) to allow you to clear it and not order it again, improving your cash flow.
Q. Can I do my EOFY taxes myself?
Yes, you can, but will you do it correctly? Today’s software makes it easy to run an income and loss and then file a tax return with your tax authorities. It doesn’t inform you what you may and can’t claim, and it isn’t able to take a review of your financial position.
Do you want to be sure you are doing it right this tax time? Talk to your accountant about making sure you’ve checked all the right boxes.
