Small employers with closely held payees have been exempt from reporting these payees through single touch payroll (STP) for the 2019–2020 and 2020–2021 financial years. However, they must begin STP reporting from 1 July 2021.
Tip: STP is a payday reporting arrangement where employers need to send tax and superannuation information to the ATO directly from their payroll or accounting software each time they pay their employees.
For STP purposes, small employers are those with 19 or fewer employees.
A closely held payee is an individual who is directly related to the entity from which they receive a payment. For example:
- family members of a family business;
- directors or shareholders of a company; and
- beneficiaries of a trust.
Small employers must continue to report information about all of their other employees (known as “arm’s length employees”) via STP on or before each pay day (the statutory due date). Small employers that only have closely held employees are not required to start STP reporting until 1 July 2021, and there’s no requirement to advise the ATO if you’re a small employer that only has closely held payees.
The ATO has now released details of the three options that small employers with closely held payees will have for STP reporting from 1 July 2021:
- option 1: report actual payments through STP for each pay event;
- option 2: report actual payments through STP quarterly; or
- option 3: report a reasonable estimate through STP quarterly – although there are a range of details and steps to consider if you take this option.
TIP: If your business will need to lodge through STP soon, we can help you find an easy and cost-effective STP-enabled solution, or we can lodge on your behalf. Whatever you choose, remember that STP reports can’t be lodged through ATO online services and isn’t a label on your BAS, so early preparation is needed.