Owner wants to pay extra tax

Sunflow
4 Posts
Cover User
Australia
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Owner wants to pay extra tax

The own of my small business does not  draw a wage but he wants to make a payment to the tax office via PAYG but still not be paid anything How do enter this in myob? If I enter 25K in wages and -25K in PAYG it wont let me process the payslip as the net pay is 0 ??

Do I just record a negative payslip ? - 0 wages and -25K in payg?

 

Thanks,

6 REPLIES
Ultimate Partner BooksInTheCloud
1,238 Posts
Ultimate Partner
Australia
Accepted Solution Solved Solution

Re: Owner wants to pay extra tax

Hi @Sunflow

 

Does the owner what to pay more PAYG income tax or PAYG withholding tax?

 

If the owner wants to declare wages he has to pay himself a Gross Wage and deduct PAYG withholding and pay 9.5% superannuation, report wages and PAYG on the IAS or BAS to the ATO, receive a payment summary 30 June, and wages declared and lodged with the ATO on the PAYG Payment Summary Annual Report

 

I would highly recommend you seek advice from the accountant before proceeding.   I have included @ronatbas who might add comment here as well.

@renae2peas
Ultimate Partner Seattle
1,249 Posts
Ultimate Partner
Australia

Re: Owner wants to pay extra tax

@Sunflow @BooksInTheCloud

 

First step is to determine the type of entity eg sole trader or company.

 

A Sole Trader cannot pay a wage to the Proprietor.

A Company should pay a Salary to ensure the Taxable Income of the Director is at least $18,200.
You may need to enquire as to a Director's Investment Income.

 

I often suggest to clients to make early payments to the ATO.

 

As Renae suggests, it is best to speak with your Tax Accountant.

 

Duncan

Duncan Smith
Business Advice + Tax
www.businessadviceplustax.com.au
Helping business owners build a better business since 1998
E expressgst@optusnet.com.au T 02 9904 3672 7 days
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Ultimate Partner ronatbas
3,604 Posts
Ultimate Partner
Australia

Re: Owner wants to pay extra tax

@BooksInTheCloud @Sunflow @Seattle

 

Duncan has covered most of the areas that i would have mentioned. Notionally this person has taken drawings or some monies over the year and these could be recorded as wages if it is a company, $25K per year is tax on $93+K 

One comment I would make is that Directors are in a unique position as far as PAYGW goes. Their accountant can vary the salary and PAYGW after June 30. 

 

If there has been proper tax planning done beforehand this should not be necessary. Accountants should be busy at this time of year making sure that their clients have shown sufficient wages and super to minimize tax, have not exceeded the $30K/$35K super payable limit.

i have a problem with Duncan's comment:

You may need to enquire as to a Director's Investment Income.

This is purely the realm of the tax Agent and should not come into actions that staff make (within potentially one his entities) without clear instruction.

Going back to the potentially $93K of wages that he has drawn, if the company has not made a profit of more than that then he may face an ATO investigation as they will say - you paid PAYG on $93K so you must have taken it and it is not legal for a Director to have taken money that is not in the company. It sounds pervers but that how they operate.

BTW you can do a zero pay in MYOB AR+, it is often used to do all manner of adjustments. What it will do is query the action but you can proceed. Before you do that though encourage your employer to tal to his Accountant

Ron B
BAS Group
03 95588477

info@basgroup.com.au
Making MYOB work for you
Ultimate Partner Seattle
1,249 Posts
Ultimate Partner
Australia

Re: Owner wants to pay extra tax

@Sunflow @ronatbas @BooksInTheCloud

 

Ron,    Interesting Topic.

 

I agree with your comments that Accountants should be very busy at this time of year....

 

Moreso, I believe that Tax Planning should occur throughout the year.

In August I ask the Director what they think their Salary should be for the forthcoming year this is then compared to the expected Profit before Director/Family Salary for the forthcoming year.

Say the Director wants a Salary of $100,000 for the forthcoming year and the Company profit supports it then I would report $25,000 in W1 in four BAS.

 

In relation to Sunflow, he/she and the Business Owner should be talking to their Tax Accountant.

I believe that the Bookkeeper/BAS Agent should, at the very least, have a basic understanding of the Business Owner/ Directors' Financial Affairs and Cash Flow. This is important as Bookkeepers/BAS Agents continue to grow in status and offer more value added services.

 

I once had a Bookkeeper issue a Director with a Payment Summary of $18,200 without consultation with the Tax Agent (this was not the best tax position). One of the difficulties is the relative short period of time for a business to issue Payment Summaries to employees - 15 days may be sufficient for those with accounting staff but somewhat difficult for a Bookkeeper/Tax Agent who visits the Business Owner to prepare the Payment Summaries.

 

Ron mentions that Tax Agents can prepare Payment Summaries after the end of the FY.

This is true as Tax Agents have Closely Held Concessions where the PAYG Payment Summary Statement and Payment Summaries can be preparing and lodged before the due date of the Tax Return. This only applies to small entities where the Director/Associates are the only employees.

I understand that Tax Agents have until 30 September to prepare the PAYG Payment Summary Statement where the business has employees other than Directors/Associates - this does not suit employees who are waiting for their Payment Summary to appear on their Pre-Filling Report before lodging their Tax Return.

 

I wonder if, in the future, most Tax Agents will adopt a business model where they discuss the performance of a business with the Business Owner on a regular/quarterly basis. Regular Tax Planning would be part of this discussion. I will pose the question to you whether you think i do the above and whether the Tax Agents that you work with do as well.

 

Busy doing BAS (and regular tax planning) over the weekend.

 

Duncan       

 

Duncan Smith
Business Advice + Tax
www.businessadviceplustax.com.au
Helping business owners build a better business since 1998
E expressgst@optusnet.com.au T 02 9904 3672 7 days
Ultimate Partner BooksInTheCloud
1,238 Posts
Ultimate Partner
Australia

Re: Owner wants to pay extra tax

Agree with you @Seattle as a bookkeeper I would not process anything of this nature without having written instructions from the tax agent/accountant.   It is about protecting ourselves as well, if anything goes wrong the bookkeeper will likely be blamed in the end - and rightly so if they didn't consult with the tax agent to begin with.  Bookkeepers/BAS agents are not allowed to legally give payroll or tax advice and on that basis I would prompt the owner that he must seek tax advice and ask for instructions to be stipulated in writing so as the bookkeeper you can process accordingly. 

@renae2peas
Sunflow
4 Posts
Cover User
Australia

Re: Owner wants to pay extra tax

Thank you all for taking the time to respond to my query - it has all been very helpful and yes I will definately "handball" this to the acountant - so glad I asked the forum or I may have ended up the scapegoat as described in BooksInTheCloud reply.

 

Many thanks,

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