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 KeyPay.
Have you set up quarterly STP reporting for your closely held employees and you're now ready to lodge? Follow the steps here to create and submit a quarterly pay event to the ATO.
What is a closely held employee?
A closely held employee (payee) is one who is “not at arm’s length”. This means they are directly related to the entity from which they receive payments. Closely held employees could be:
- Family members of a family business
- Directors or shareholders of a company
- Beneficiaries of a trust
Contact the ATO or your certified accountant or bookkeeper if you are unsure if an employee in your business is classified as a closely held employee.
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
- Trust distributions
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.
Content sourced from KeyPay