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Single Touch Payroll and closely held payees

Single Touch Payroll changes the way employers report their wages, PAYG and super to the Australian Tax Office (ATO). At present, businesses with more than 20 employees should already be STP compliant, while those with 1-19 employees have until 1 July 2019 to get compliant. But what about employers with closely held payees? Read on to find out what Single Touch Payroll means for you and your business.

Why Single Touch Payroll?

Single Touch Payroll is designed to ultimately streamline your reporting to the ATO, while also protecting the super entitlements of employees. The ATO will have access to real-time information, which hopefully means no employees will get any end-of-year surprises about how much tax they owe.

How does Single Touch Payroll work?

Every time you run a pay event, the ATO will receive information about the salary or wage, tax withheld and superannuation liability. If you have accounting software like QuickBooks will allow you to easily manage your STP payroll obligations. QuickBooks Online integrated Payroll, powered by Employment Hero, is STP enabled.

What does a closely held payee mean?

A closely held payee is someone who is directly related to the entity from which they receive payments, for example:

  • Family members of a family-owned business
  • Directors or shareholders of a company
  • Trustees or beneficiaries of a trust

How is the ATO helping closely held payees transition?

Due to the complexity of small businesses who employ closely held employees, the ATO is making some exemptions to help with the transition. Closely held payees will be exempt from STP reporting for 2019-2020 financial year, but reporting will need to commence on 1 July 2020.

The ATO will also only require a quarterly pay event period for closely held payees, but arm’s length employees still need to be reported each pay day.

Quarterly concession

From 1 July 2020, employees will have the option to report closely held payees’ information quarterly through STP and make reasonable estimates each quarter.

Employers can calculate these amounts using one of the following methods:

  • Actual withdrawals (not including payments of dividends or which reduces the liabilities owed by the business entity to the closely held employee)
  • 25% of the salary/director feeds from the previous year per quarter
  • Vary the previous years’ amount (to take into account trading conditions) within 15% of the total salary for the current financial year

Quarterly concessions exclusions

This concession does not apply to:

  • Large withholders with an annual withholding of more than $1 million
  • Those who have not demonstrated good compliance behaviour
  • Those who do not make a genuine attempt to lodge under STP

To find out more about STP and closely held payees, listen to the ATO’s webinar.

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