• # 95379
• Wed 04 Dec 2013 05:03 AM

I have been bookkeeping for a business for over 10 years. I recently had a conversation with an employee and it came out that this employee and her daughter were both working for the business, however the payment for both employees was only going to one person, the mother.

Therefore employee A works 5 hours, employee B works 5 hours. Employee A is paid 10 hours so as not to affect employee B earnings, because she was also employed somewhere else.

This was news to me and in fact a shock. Could you please offer some advice as to the best way to handle this situation. While I do not wish to lose a long standing client, it is more important to me that I do not put my registration as a BAS Agent into question by potentially contravening the Professional Code of Conduct I agreed to uphold for ICB and TPB.

How should you and your client handle this situation?

What do you do?

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• # 96693
• Mon 23 Dec 2013 11:47 PM

ICB's Response:

What you can do first is inform the client of their legal obligations as an employer and point out what they are doing incorrectly. Advise them of the implications for yourself and the BAS reporting of the PAYG withholding. Not to mention workcover. This is possibly one of the most important areas — what if Employee B is injured at work?

You don’t have to cease the relationship immediately. Because you didn’t know about the situation until now, what the employer has been doing incorrectly before won’t affect your professional status. The employer would be held liable for allowing this illegal employment arrangement. But now that you DO know what’s happening, you are right that you need to take action.

So the issues to raise in discussion are:

1. the employee’s rights and safety
2. the business owner’s legal obligations
3. correct reporting of PAYG obligations to the ATO
4. the implications if anything did go wrong and Workcover and FairWork got involved — possibly huge penalties — and that you are looking after the owner’s interests by raising this issue and advising of the correct reporting
5. not putting Employee B on the books and withholding tax accordingly is aiding her in avoiding tax — something the ATO would take seriously
6. see ICB's September newsletter for more detail BUT an employee can claim the tax free status from more than one employer if they believe they will not earn more than $18,200 in a tax year — perhaps Employee B is mistakenly thinking she would be paying a higher rate of tax for her second job? This would only apply if she was likely to earn more than $18,200.
7. and lastly mention your own professional obligations in correct reporting and the code of professional conduct.

You can then give the employer a little time to absorb the information, and hopefully s/he will inform Employee B that she needs to be on the books and get them set up correctly. Let them know that you will not be processing pays for A and B unless you are satisfied of the correctness of the pay and that the payrun signed off by the supervisor/business owner.

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