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Anonymous
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Just to clarify some things:
This isn’t my business, it’s my partners, I just send invoices and source clients
Cash was only paid for 2 weeks (why, I don’t know) it was as the business was starting.
The only records of employee hours were kept in a diary, it was lost on a job site, I now make digital copies after every job.
Withdrawals were lump sums, useless.
Could have been 2-5 employees at any time, hours per day could have been anywhere between 2 hour job to 9 hour job.

I read an interesting page on the ato site about penalties for not keeping records, and it seemed to emphasize that the ato will assist or guide you before applying penalties fines. This is a very casual, small business at the moment, not even needed to register for gst.

So back to the problem solving…
Looking back at invoices from those 2 weeks, I’m 100% sure based off the work amount that was done that the employees didn’t work 20 hours per week. Even now they’re only averaging about 30 hours or less a week.
So if I’m 100% sure they didn’t work more than 20 hours in those 2 weeks, as a last resort, would it be safest to tell the ato they worked 20 hours, and pay the tax withholding for those 20 hours, per employee (a loss for the business, and a lesson learned) if my partner can figure out exactly who worked those 2 weeks.
The business is still fresh, no tax from pays has been given to the ato yet or activity/PAYG statements.

Summary: If he pays tax from wages from hours that are guaranteed to be more that was worked by the employees, and uses the same information for PAYG statements, will this keep the ato happy?

Note: My partners employees are his mates, hence the relaxed attitude towards pays. I hope when he sees an accountant they emphasize the importance of professionalism, because he sure didn’t listen to me about it.

Thank you everyone for your time and assistance