XBert Type: Standard
Accounting Software: Xero, MYOB, QuickBooks Online
Country Restriction: Australia only
Risk Type: Payroll Risk
Business Function: Payroll
Overview
This XBert checks each employee's pay run to see whether the untaxed reimbursements they received are larger than their taxed wages. Reimbursements are meant to repay an employee for genuine out-of-pocket business expenses, so they carry no PAYG withholding and no superannuation. When the reimbursement total tops the actual wages in the same pay run, it can be a sign that pay is being routed through "reimbursements" to escape PAYG and super, or that a genuine wage has been miscoded. Either way, it is worth a quick check before you finalise.
What it does
It looks at the payroll for each employee, one pay run at a time. For that pay run it adds up the wage lines and, separately, adds up the reimbursement lines, then compares the two totals. It is interested in the rare case where the untaxed reimbursement total is both a meaningful amount and larger than the taxed wages paid in the same pay run.
How it works
The XBert raises a flag when, for a single employee in a single pay run, the reimbursement total is at least a meaningful amount (by default $1,000) and that reimbursement total is greater than the wages paid in that same pay run.
To avoid false alarms, it deliberately ignores:
Pay runs where the reimbursements are small, because everyday expense repayments such as a tank of fuel or a few stationery items are perfectly normal.
Pay runs where the reimbursements are smaller than the wages, because that is what an ordinary pay run with a few incidental reimbursements looks like.
In short, it only speaks up when untaxed reimbursements are both material and the dominant part of someone's pay for that period.
Example/Use Case
Marcus runs a small electrical contracting business. In one fortnightly pay run, his offsider Dean is paid $900 in wages but also $3,200 labelled as "reimbursements". Because reimbursements are untaxed and super-free, this means most of what Dean received that fortnight carried no PAYG withholding and no superannuation. XBert flags the pay run. Marcus checks and realises $2,400 of it was actually for hours worked on a weekend job that was entered as a reimbursement by mistake. He recodes that amount as wages, so the correct PAYG is withheld and super is calculated on it, and only Dean's genuine $800 of tool and fuel costs stays as a reimbursement.
Accounting software
This XBert runs on payroll data from Xero, MYOB and QuickBooks Online.
Which countries it supports
This XBert is available for Australia only. It is built around Australian PAYG withholding and superannuation rules.
Processes
Business area: Payroll. To resolve a flagged pay run:
Open the employee's pay run and review the lines recorded as reimbursements.
Confirm each reimbursement is for a genuine business expense the employee paid out of pocket, ideally backed by a receipt or expense claim.
If any amount is really payment for hours worked, recode it as wages so the correct PAYG is withheld and superannuation is calculated on it.
Remember that a payment treated as a "reimbursement" but actually earned for work is still ordinary time earnings for super and assessable for PAYG.
If the same pattern appears in earlier pay runs for this or other employees, review and correct those as well.
Where withholding or super was understated in a period already reported through Single Touch Payroll, follow the usual process to correct it before lodgement or in a later pay event.
Once the pay run is corrected, mark the XBert as resolved.