Single Touch Payroll (STP) was introduced by the ATO to replace the PAYG Payment Summaries system, requiring employers to report their payroll information in real time. Most employers now report payroll data to the ATO each pay run using STP enabled software. The ATO has recently made STP changes which have taken effect from 1 July 2021.
What has changed for small employers – closely held payees
From 1 July 2021 small employers (with 19 or fewer employees) are now required to report payments made to ‘closely held’ payees through STP enabled software.
Small employers were exempt from reporting closely held payees through STP up until 30 June 2021. A closely held payee is an individual who is directly related to the entity, for example family members of a family business, directors or shareholders of a company, and beneficiaries of a trust.
When to report
There are 3 options to report your closely held payee data:
- Report actual payments on or before each pay run
- Report actual payments quarterly when the activity statement for that quarter is due
- Report a reasonable estimate quarterly
Reporting quarterly means that you only need to lodge an STP report in quarters where you have made a payment that you need to report. Each quarter you still need to include any PAYG withholding amounts on your activity statement, and be sure to make Superannuation Guarantee contributions for your closely held payees before the relevant due date.
If your circumstances change and your reported reasonable estimates in previous quarters are either too high or too low, you have until the due date of your next quarterly STP report to correct a closely held payee’s year to date information. It is important not to underestimate amounts reported for closely held payees as you may be liable for penalties and interest.
How to report
Your best option is to subscribe to a suitable software package. All the major players like Xero and MYOB have stand-alone payroll packages for four or less employees for $10 per month that automate the process.
The ATO maintains a product register to include all available STP software options. This may be through an update to your existing software, or an additional service. Specifically for small or micro employers is a list of no cost or low cost STP software solutions, that cost less than $10 per month.
Each software provider will provide a way to report quarterly closely held payee data in addition to reporting payroll for regular employees each pay day. However, it may be more efficient for you to report your closely held employees at the same time.
End of financial year finalisation declaration
You will need to make a finalisation declaration in your STP enabled software to let the ATO know your STP reporting is complete for an employee for a financial year. This means your employees’ information will be available via myGov rather than on a payment summary.
Small employers with only closely held payees must make a finalisation declaration by the due date of the individual’s tax return, and the due date for arm’s length employees remains 14 July. If you are using the reasonable estimate reporting method you must correct the actual year to date amount paid.
What has changed for micro employers
Until 30 June 2021 a quarterly STP reporting option applied to micro employers (1 to 4 employees). From 1 July 2021 micro employers will need to report their payroll data in real time, or they can continue to report quarterly through a registered tax or BAS agent if they meet the following eligibility requirements:
- Lodge activity statements electronically through a registered tax agent
- Have a non-computerised payroll i.e. manually on a paper or a spreadsheet
- No overdue amounts owing to the ATO or lodgement obligations
- Meet the ATO’s exceptional circumstances determined on a case by case basis
Exceptional circumstances may include natural disasters, impeded access to records, serious illness or death of a family member, internet issues such as the inability to connect to the internet or an unreliable or slow internet connection, or having seasonal or intermittent workers.
Next phase of STP
From 1 January 2022 extra information will need to be included in your STP reporting for each employee, including their employment basis, itemised payment types that make up the gross amount (e.g. allowances, overtime, salary sacrifice), how they are taxed and details of why their employment has ceased.
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Author: Danielle Pomersbach