From 1 July 2021, any business with 19 or less employees that pay closely held employees are obligated to start reporting Single Touch Payroll (STP) events. Learn how to set up STP events for businesses with closely held employees in QuickBooks Payroll powered by Employment Hero.
Learn more about managing closely held employees in QuickBooks Payroll.
What must be reported for a closely held employee?
Like all STP reporting for arm's length employees, STP reporting for your closely held employees must include:
- Year-to-date amounts for each closely held employee who received a payment subject to withholding that is required to be reported via STP;
- Ordinary times earnings (OTE) or your superannuation liability for the employee
- Total gross wages for payments being reported – same as the W1 label on your BAS
- Total PAYG withholding payments (PAYGW) being reported – same as the W2 label on your BAS
You must not report on:
- Reimbursements where the amount is expected to be expended in full
- Dividends
- Trust distributions
- Loans.
How to report STP for closely held employees
There are three options that you can choose to report STP for closely held employees:
- Report actual payments on or before the date of payment (same process as reporting STP for regular, arm’s length employees)
- Report actual payments quarterly (report payments at the same time when BAS is due)
- Report a reasonable estimate quarterly (report amounts equal to or greater than a percentage of gross payments and tax withheld from the latest year, across each quarter)
Visit the ATO website for more information on these three options and some examples that will help you decide the best way to report.
Option 1: Report payments on or before the date of payment
If you choose to report amounts you pay to your closely held employees on or before pay day, the general STP reporting rules will apply.
If a closely held employee is to be reported on or before each pay day:
- Navigate to Payroll, then select the closely held employee's name.
- Select Pay Run Defaults, then tick the Closely held employee box.
- Select Report employee each pay run as the reporting method.
- Select Save.
As you would for your arm's length employees, you must still:
- include any pay as you go (PAYG) withholding amounts on your activity statement and pay the amount you owe to the ATO by the due date.
- make super guarantee (SG) contributions for your closely held employees before the quarterly due date.
Option 2: Report actual payments quarterly
If you choose to report actual payments on a quarterly basis, your quarterly STP event is due on or before the due date for your quarterly business activity statement (BAS). This includes concessions that may apply to your circumstances.
If you report PAYG Withholding on monthly BAS, your quarterly STP event is due on the same day as your BAS for the final month of the quarter.
Like regular pay and update events, the quarterly STP event will contain year-to-date amounts processed in all finalised payruns since 1st July. For example:
- STP events lodged for the July-September quarter will contain data from 1st July - 30th September
- STP events lodged for the October-December quarter will contain data from 1st July - 31st December
Choosing to report STP on a quarterly basis does not change the due date for:
- Reporting and paying your PAYG withholding on your activity statement
- Making SG contributions for your closely held payees
To set up your closely held employees on a quarterly reporting frequency:
- Navigate to Payroll, then select the closely held employee's name.
- Select Pay Run Defaults, then tick the Closely held employee box.
- Select Report employee on a quarterly basis as the reporting method.
- Select Save.
Notes:
- Existing employees as at 20 August 2021, who had the "closely held employee" checkbox ticked will automatically be updated to this setting.
- Selecting this option excludes the employee from appearing in standard pay events, update events and finalisation events. Rather, these closely held employees will be reported completely separate from at arm's length employees.
Option 3: Report a reasonable estimate quarterly
If you choose to report using this method, you need to:
- Make a reasonable estimate of the amounts you have paid to closely held employees during the quarter
- Enter these estimates into a pay run and ensure the pay run is finalised and has a date paid no later than the last day of the quarter
- Report that estimate through STP
As the estimate is based on payments you have made to your closely held employees, you should also:
- Report and pay your PAYG withholding on your activity statement based on your estimate
- Make SG contributions for your closely held payees based on your estimate
Like regular pay and update events, the quarterly STP event will contain year-to-date amounts processed in all finalised payruns since 1st July. For example:
- STP events lodged for the July-September quarter will contain data from 1st July - 30th September
- STP events lodged for the October-December quarter will contain data from 1st July - 31st December
Advice on how to determine a reasonable estimate and make corrections to estimates can be found on the ATO website.
Choosing to report STP on a quarterly basis does not change the due date for:
- Reporting and paying your PAYG withholding on your activity statement
- Making SG contributions for your closely held payees
To set up your closely held employees on a quarterly reporting frequency:
- Navigate to Payroll, then select the closely held employee's name.
- Select Pay Run Defaults, then tick the Closely held employee box.
- Select Report employee on a quarterly basis as the reporting method.
- Select Save.
Ready to lodge quarterly STP events for your closely held employees? Learn how to create and submit a quarterly pay event to the ATO.
Content sourced from Employment Hero