Your most common EOFY questions, answered
Taxes might be one of only two certainties in life, but that doesn’t mean there is always certainty around them.
The looming approach of the end of financial year (EOFY) means many NZ small business owners will be enlisting the help of a professional accountant to make sure their affairs are in order. To help you make the most of your time with them, we’ve spoken to two leading small business accountants who have shared their most common EOFY questions from clients, so you can get a head-start.
Butch Mawdsley, REB Group Limited, Auckland
Q. How can I claim for my car?
There's more than one way. One way to do it would be to claim it on a kilometre allowance – that reimburses the cost to your business and does not have income ramifications for you as an individual.
There are requirements for a logbook. However, if you have a record of your meetings and movements through your email, that can be sufficient to support your claim.
Q. I've been making a fair amount of money. Is it worth buying a vehicle at the end of the year to save tax?
When you purchase a vehicle, the decision should be about cash flow, not tax. You don’t get a real advantage by purchasing a vehicle right at the end of your trading year. You're better off considering your cash flow at the beginning of the year to maximise the 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 enter into some kind of payment arrangement. There are a few ways to do that. You can contact the IRD and set up a payment plan but interest is charged and there are penalties if you miss your payment.
The alternative is that you can approach companies that offer tax pooling. They're able to fund your tax payments through a pooling arrangement and the interest rate is often a lot less than the IRD. It's also a lot more flexible.
A small business loan is another helpful option.
Chris Mercer, Managing Director at MBP Advisors + Accountants, Taupo
Q. How much tax will I have to pay?
There is no quick, one-size-fits-all answer to this as it varies wildly based on your business structure, the taxes you are registered for and the industry you operate in.
We generally recommend that clients save roughly 20-25% of their turnover to help cover income tax, GST, Accident Compensation Corporation (ACC) levies and any little surprises throughout the year.
Q. Should I be GST-registered for the next financial year?
Again, the answer varies for each business owner depending on industry, target market and turnover. The threshold for registering for GST in New Zealand is $60,000 in turnover in any 12-month period, not just a financial year or calendar year.
You can voluntarily register if you’re expecting to cross the threshold or are undertaking an activity where GST is included in industry prices as a norm.
Q. Do I need to do a stocktake?
The short answer is yes. There is an exemption which allows those with low values of stock to simply estimate the stock they have on hand. 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 process also identifies SLOBS (slow-moving and obsolete stock) so you can clear it and not order it again, improving your cash flow.
Q. Can I do my EOFY taxes myself?
Of course you can, but will you do it right? Software available today makes it easy to run a profit and loss, and file a return with the IRD. However, it doesn’t tell you what you can and can’t claim, and it doesn’t take a closer look at your overall financial position.
Want to get it right this tax season? Talk to your accountant about ticking all the right boxes.
The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisers. Although every effort has been made to verify the accuracy of the information, we disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.
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