The Australian Taxation Office (ATO) announced earlier this year that small businesses will need to be Single Touch Payroll (STP) compliant, including micro employers (0 to 4 employees) who were previously able to report quarterly, but will not be able to make use of automatic concession as of 1 July 2021.
One of the key changes for STP compliance is the inclusion of reporting on closely held payees, and not waiting until tax return preparation time to determine final wages.
In today’s blog, we will be looking at what defines a closely held employee and what the reporting requirements for directors or employers are for reporting data related to closely held employees.
Who is considered a closely held employee>
A closely held employee, also known as a closely held payee, is someone who is directly related to the entity that provides them payment. Directors, shareholders and beneficiaries of a trust are all examples of closely held payees.
For some businesses, closely held employees payments include irregular or sporadic pay runs for family members. For this reason, up until 1 July of this year, small employers weren’t required to complete STP reporting of closely held payees.
What are the requirements for reporting on closely held payees (employees)?
From 1 July 2021, wages paid, wages journaled, directors fees and contractors with voluntary withholding will need to be reported via STP on or before the submission due date.
Smaller business (with less than 20 employees) have the option to report these amounts quarterly or on or before each payday. Larger employers, however, will need to apply to the ATO for the quarterly concession.
How to report amounts paid to your closely held payees
According to the ATO, employers’ quarterly STP reports for closely held payees must include the following details:
- Year-to-date amounts, up to the last day of the quarter, for each closely held payee who received a payment subject to withholding that is required to be reported via STP.
- A payee’s ordinary times earnings (OTE) or an employer’s superannuation liability for the payee.
- Total gross wages for payments being reported – similar to the W1 label on employers’ activity statements.
- Total PAYG withholding payments being reported – similar to the W1 label on employers’ activity statements.
- Employers have the option of including any applicable voluntary reportable withholding amounts in their quarterly STP reports that they paid to a closely held payee during the quarter.
When should employers submit their quarterly reports?
Employers who have chosen the quarterly reporting option, need to submit their quarterly STP reports on or before the due date for their quarterly activity statements. These submissions include allowances that apply to their specific businesses.
Those employers that report their PAYG withholding on monthly activity statements will have their quarterly STP reports, which include amounts paid to their closely held payees, due on the same day as their activity statements for the final month of the quarter.
However, it is important that employers remember that choosing the quarterly option does not change the due date for reporting and paying PAYG withholding on their activity statement or making SG contributions for closely held payees.
Also, reporting information about all other employees via STP must be done on or before payday.