Your most frequent EOFY questions, answered
Taxes may be one of only two certainties in the world of finance however that doesn’t mean there is any guarantee that they will be paid.
The approaching closing of the financial year (EOFY) implies that the majority of small-business owners will seek the assistance of a professional accountant to make sure they have their finances in good order. To help you make most of your time working with them, we’ve spoken to two leading small business accountants who given their top client EOFY concerns and give you an advantage.
Q. How can I claim for my vehicle?
There’s more than one way. One method is to claim it on an allowance for kilometres – which is a reimbursement to your business and does not impact your income for individuals.
There are rules for keeping an account book. However, if you have an inventory of your events and movements through your email, that can be sufficient to justify your claim.
Q. I’ve earned a fair amount of money. Do I need to buy a vehicle at the end of the calendar year to lower tax?
When you purchase a vehicle you should make the purchase about cash flow and not tax. There isn’t any real advantage from purchasing a vehicle towards the close of the year you’ve been trading. You’re better off considering your cash flow at start of each year to maximize your allowance for depreciation and interest.
Q. I’ve got no cash. How am I going to cover my taxes?
You’ll have to sign a type of arrangement to pay. There are many methods to achieve this. You can reach out to the tax department to establish a payment schedule however, interest will be charged and you will be penalized when you don’t make your payment.
There is another option: you can approach companies that offer tax pooling. They’re able fund tax obligations via a pooling agreement and the interest rates are usually significantly lower than that of the department responsible for tax. Additionally, it’s more flexible.
A small business loan is a helpful option.
Q. How much tax will I be required to pay?
There is no simple solution that is universally applicable because it is wildly different in relation to the business structure you have and the tax you are required to pay and the field you work in.
We usually recommend that our clients save roughly 20-25% of their annual turnover to cover income tax as well as GST, Accident Compensation Corporation (ACC) levies , and any small surprise throughout the year.
Q. Do I need to be GST registered for the following financial year?
Also, the answer will differ for each business owner based on industry, target market and turnover.
It is possible to register for GST on your own in the event that you’re planning to cross the threshold or are engaged in an activity in which GST can be included into the industry prices as a rule.
Q. Do I require a stocktake?
The simple solution is yes. There’s an exemption that allows people with low value of inventory to estimate the amount of stock they have on hand. However, if you’re in the business of selling items, it’s smart to know precisely how many things you have to sell.
The process also flags SLOBS (slow-moving and obsolete stocks) which allows you to dispose of it without having to purchase it in the future, thereby improving the flow of cash.
Q. Can I do my EOFY taxes myself?
You can certainly do it, but will you do it right? Today’s software allows you to easily run the numbers of a profit and loss and then file a tax return with Tax Department. It doesn’t inform the tax benefits you cannot claim, and does not take a deeper analysis of your overall financial position.
Want to get it right this tax time? Discuss with your accountant the possibility of making sure you’ve checked all the right boxes.
