Single Touch Payroll Reporting for Closely Held Payees Mandatory from July

Closely held payees must be reported via Single Touch Payroll from July 2021. Now is the time to get organised.

Does your business make payments to closely held payees? If so, you will need to start reporting these payments via Single Touch Payroll (STP) from July 2021.

Closely held payees include family members, directors or shareholders of a company and beneficiaries of a trust.

If you’re already reporting employees via STP, then it will be easy to include the extra payees from July.

If your business only pays closely held payees then you may not have signed up for Single Touch Payroll. If not, now is the time to establish a reporting solution.

Typically, closely held payees are paid amounts on the advice of the tax agent, and often these amounts are not calculated until they do your tax return. In this situation, the business can report estimated amounts via STP.

Three Ways to Report Payments to Closely Held Payees

Report actual payments on or before the date of payment if you lodge your own STP reports through your ATO business portal.

Report actual payments quarterly when the activity statement is due. This option is available if you have a BAS or tax agent lodge on your behalf and they already have the ATO quarterly reporting concession in place.

Report a reasonable estimate quarterly. Estimates should be based on amounts equal to or greater than 25% of the previous year’s payments.

If you’re reporting quarterly estimates, it’s important not to underestimate amounts to be paid, as the business may later be liable for superannuation guarantee late charge and penalties.

Small employers have until the individual’s tax return due date to submit the STP finalisation declaration. (For all other payees, the finalisation is due by the usual date of 14 July).

If you’d like help with Single Touch Payroll reporting for your closely held payees, talk to us about planning ahead for lodgement and calculating estimates. We’ll help organise your systems so you’re prepared for STP reporting obligations,

Single Touch Payroll is now compulsory for all employers.

Single Touch Payroll (STP) is a new system of reporting wages, tax and superannuation information to the ATO. Initially, large employers were required to report from 1 July 2018. Now, all employers must enter into the reporting system from 1 July 2019.

Small and micro employers have until 30 September to enter the system.

STP is a reporting obligation only—it does not change the way you pay employees.

How it w​​​​orks

Employers must submit payroll data to the ATO each time employees are paid. The ATO refers to this as a ‘pay event’.

All the major payroll software providers are compliant with the reporting requirements, allowing employers to lodge the information with the ATO directly from within the software.

All pay events must be lodged electronically.

Eligible micro employers with less than four employees will have simpler reporting options, such as being able to report quarterly through a registered tax or BAS agent.

There are some exemptions for certain employers or employees, such as closely held payees, employers without internet and some foreign workers.

What does it mean for employees?

STP does not change payments, entitlements or pay slips for employees.

Employees will be able to see all year-to-date payroll information online through their individual myGov account.

Instead of receiving a payment summary, employees will receive an ‘income statement’ in their myGov account once the payroll year is finalised by the employer.

What next?

If you do your own payroll and will be submitting the pay event information to the ATO yourself, check this link for all you need to know about reporting STP: ATO Report through Single Touch Payroll.

Get STP ready for your first pay run of the new financial year.

If you do not already use payroll accounting software with STP reporting built in, talk to us about the best solutions for your business.

Is your small business ready for Single Touch Payroll?

For employers with 19 or fewer employees, single touch payroll (STP) legislation will be coming into effect on the 1st of July 2019. Are you ready? Because it’s important to start preparing now.

You need to know what Single Touch Payroll is, what the changes mean for your business and who it affects. And more importantly, you need to know what to do to prepare, so that you will be compliant.

What is Single Touch Payroll?

For employers with 20 or more employees, you will already be familiar with STP, but if you are unaware, STP is the mechanism for sending tax and super information to the ATO directly from your payroll or accounting software every time you pay your employees. The legislation was passed in February this year to extend this to employers with 19 or fewer employees.

How to prepare your small business for STP and ensure compliance

Most popular payroll software companies will have the correct facilities ready to go, such as Xero and MYOB. We will have spoken to many of our clients already about STP, however, if you are unsure, talk to us.

There are a few things to be aware of you as you get ready to use STP reporting.

1. Check your software – you may need a software update or additional step added to your process
2. Ensure you have factored STP into your payroll process
3. Ensure your payroll compliance is up-to-date generally, including employee benefit, wage and super entitlements and maintaining accurate records

The first year of using STP reporting is a transition year and there will be assistance from the ATO. That means penalties for errors will not generally apply.

If you don’t think you will be ready by the 1st of July, you can apply for a deferral through the ATO. The ATO gives a list of possible reasons for deferring, including lack of internet coverage, or if further development of software is needed.

If you haven't already done so, talk to us about doing your preparation now to ensure you are ready by the 1st of July.