Small employers (19 or less employees) with closely held payees are exempt for the 2019 - 2020 financial year and therefore do not need to be reported but can be if your Payroll solution includes this functionality. They will need to be reported using STP from 1 July 2020 and you will have the option to report their closely held payee information quarterly.
For closely held payees who are not reported through STP for the 2019 – 2020 financial year, follow existing processes. This means you will still need to provide them with a payment summary and lodge a Payment summary annual report (PSAR) to the ATO.
A closely held payee is one who is not at arm’s length. This means they are directly related to the entity from which they receive payments for example:
Family members of a Family Business,
Directors or Shareholders of a Company,
Beneficiaries of a Trust.
All arm’s length employees of the entity must still be reported on or before the payment date (which is the STP statutory due date).
What is the quarterly STP report due date?
If you report quarterly, you will need to send your STP report once per quarter for the closely held payees at the same time you lodge your activity statement.
How do I lodge the quarterly STP report?
The due date for lodgement will be the due date of your activity statement. You can also speak with your registered agent about your activity statement due date.
The STP report needs to be lodged through an STP-enabled solution. You can either lodge the report yourself or have your registered agent do this on your behalf.
The STP report cannot be lodged through ATO portals and is not an additional label on the activity statement.
What payments are to be included in the quarterly report?
You will need to make a reasonable estimate of a year-to-date amount for payments paid to your closely held payees up to and including the last pay day of the quarter.
Speak to your solution provider or tax professional to see how they are offering quarterly reporting.
How do I calculate the amount?
You can calculate these amounts using one of the following methods;
Withdrawals taken by the payee (but do not include payments of dividends or payments which reduce liabilities owed by the business to the closely held payee).
Calculating 25% of the total salary or director fees from the previous year or the year of the last lodged tax return of the closely held payee.
Vary the previous years’ amount (to take into account trading conditions) within 15% of the total salary or directors fees for the current financial year.
These methods are similar to the way you would calculate pay as you go (PAYG) instalments.
Can I report Reporting more frequently?
If you would like to report more frequently (such as monthly) you can do so. You should report this monthly pay event on the 21st day of the following month (this is the same due date as monthly activity statements).
What are the finalisation declaration due dates?
If you choose to report closely held payees quarterly you will have up to the due date of your income tax return to finalise the information you’ve reported for the year and make any adjustments to reported amounts.
Speak to your tax professional for information about your due date.
Do I need to notify the ATO of my closely held payees?
You do not need to apply for this concession, however, you will need to notify the ATO of your closely held payees for the 2020 – 2021 financial year.
Remember all other Employees must be reported from 1 July 2019.
Don't forget all other employees (arms-length employees) must be reported through STP from 1 July 2019.
Can I report Closely Held Employees with Single Touch Payroll now?
You will be able to report closely held payees using e-PayDay Single Touch Payroll from October 2019.