Microbusiness, need to file old pay runs, STP enabled = fine?

[JimGrey]

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As a Microbusiness we’re not technically late on starting on STP, having until 2021 last I checked. But as Jobkeeper wants STP data we thought getting up to date would be good.

Our income fluctuates as projects come and go. At year end we work out what we can pay ourselves (no “employees” just us so no harm) and then fill out in Xero 12 pay runs to total this amount.

Obviously with STP we can’t do this, which is going to make headaches. We want to show regular pay cycles, but can never know how much we can pay – so we’re always going to be behind.

Preparing for Jobkeeper we want to have our pay filed with STP. But can we now file in Xero, some old pay runs (none yet at all in Xero for this FY) and not be fined?

Any tips please would relieve some stress.
And obviously moving forwards we’ll have to do things differently – not sure how, if we can’t predict cash flow.
Finally, have an accountant but they are clearly no good, we’re looking into changing. They are not sure if fines will apply or not as this is our first time with STP.

[James Millar]

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jamesgrean, post: 269481, member: 60501 wrote:

As a Microbusiness we’re not technically late on starting on STP, having until 2021 last I checked. But as Jobkeeper wants STP data we thought getting up to date would be good.

Our income fluctuates as projects come and go. At year end we work out what we can pay ourselves (no “employees” just us so no harm) and then fill out in Xero 12 pay runs to total this amount.

Obviously with STP we can’t do this, which is going to make headaches. We want to show regular pay cycles, but can never know how much we can pay – so we’re always going to be behind.

Preparing for Jobkeeper we want to have our pay filed with STP. But can we now file in Xero, some old pay runs (none yet at all in Xero for this FY) and not be fined?

Any tips please would relieve some stress.
And obviously moving forwards we’ll have to do things differently – not sure how, if we can’t predict cash flow.
Finally, have an accountant but they are clearly no good, we’re looking into changing. They are not sure if fines will apply or not as this is our first time with STP.

Our firstly some thoughts. If your accountant’s advice has resulted in you resorting to asking on an internet forum then something is broken for sure. Look around and get a new accountant.

From your information above, it seems that these recent business stimulus measures have prompted you to make some changes to your payroll process. Presumably to either (a) get access to them or (b) maintain access to them or both. There is risk associated with that as outlined in both pieces of legislation and the Commissioners commentary.

With no other employees, if you have never reported any payroll prior to 12 March 2020 for cash flow boost and 1 March 2020 for JobKeeper then you are already in the upper-risk category for audit. Not sure if this was explained to you.

There are factors to be aware of and contemplate BEFORE you do anything that will give you access to these measures. For example, STP is not technically required for closely-held entities until 1 July 2020 AND jobkeeper reporting will have facility to contend with monthly non STP reporting. Personally I think everyone should have been forced onto STP a few years ago (as planned) HOWEVER now might not be the best time for you – especially if you are backdating STP pay events.

You also need to consider whether your cash withdrawals from the business support your proposed retrospective pay cycles. If you just come up with book entries that don’t match actual money withdrawn – again you are in upper-risk category.

Some questions

1. What type of business
2. What entity structure
3. How many employees (unrelated)
4. How many proposed employees (related)
5. Are any of those proposed related employees currently directors, shareholders, beneficiaries, partners or a sole trader?
6. When did you start a business
7. Has 2019 tax return lodged and when.

Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900

[JimGrey]

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Appreciate the concerns. This is how we’ve done things for years now. Due to irregular income we usually wait until last quarter to work it out. But now of course, our “normal” could be flagged, which is a bit rough.

We distribute pay runs due to advice from the accountant. Pay does mostly match up with what is withdrawn per quarter, to with a few dollars. Some quarters there might be one lump sum paid and the advice is to still lodge 3 pay runs for 1/3 of that amount. Other quarters there might be 3 uneven payments, but we even them out when lodging BAS for the quarter. But Q1, 2, 3 will be different totals depending on sales.

We usually pay very small amounts through the year, then at year end when we know if we have some left, we will pay more. Again, “normal” looking suspicious, not taking our highly volatile industry into account.

We literally cannot (event with attempting forecasting) plan to pay $X per month every single month as we don’t know how each quarter is going to go and the past 5 years total sales/income has been up and down.

All tax returns lodged. Business running close to 10 years.

[James Millar]

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jamesgrean, post: 269487, member: 60501 wrote:

Appreciate the concerns. This is how we’ve done things for years now. Due to irregular income we usually wait until last quarter to work it out. But now of course, our “normal” could be flagged, which is a bit rough.

We distribute pay runs due to advice from the accountant. Pay does mostly match up with what is withdrawn per quarter, to with a few dollars. Some quarters there might be one lump sum paid and the advice is to still lodge 3 pay runs for 1/3 of that amount. Other quarters there might be 3 uneven payments, but we even them out when lodging BAS for the quarter. But Q1, 2, 3 will be different totals depending on sales.

We usually pay very small amounts through the year, then at year end when we know if we have some left, we will pay more. Again, “normal” looking suspicious, not taking our highly volatile industry into account.

We literally cannot (event with attempting forecasting) plan to pay $X per month every single month as we don’t know how each quarter is going to go and the past 5 years total sales/income has been up and down.

All tax returns lodged. Business running close to 10 years.

They key in your case (which the ATO have acknowledged as a main integrity criteria) is the pattern of previous behavior. If you have followed the same process in prior years then that is solid evidence to support that you have not changed your conduct to gain or enhance access to these measures.

Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900

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