Does your business make payments to family members, directors, or shareholders? Do you have a family trust and make distributions to beneficiaries? If so, from 1 July 2021, the changes to Single Touch Payroll reporting will affect how you report your wages, super and trust distributions to the ATO.
What is Single Touch Payroll (STP) Reporting?
STP is the prescribed method of reporting wages and super to the ATO. STP works by sending wages, PAYG Withholding and super information from your STP-enabled payroll or accounting software.
What Changes from July 2021?
You will need to report payments made to closely held payees via Single Touch Payroll (STP) from 1 July 2021.
Who Is a Closely Held Payee?
A closely held payee is an individual directly related to the entity from wich they receive payments. For example:
- Family members of a family business
- Directors or shareholders of a company
- Beneficiaries of a trust
If you’re already using an accounting software, such as Xero, it will be easy to setup your STP. If your business or family trust only pays closely held payees and you haven’t signed up for Single Touch Payroll (STP), now is the time to get an STP-enabled software.
A business or trust typically pays closely held payees on the advice of the tax agent. Often, we don’t calculate these amounts until we do your tax planning or prepare tax return. In this situation, the entity can report estimated amount via STP.
Ways to Report Payments to Closely Held Payees via Single Touch Payroll (STP)
From 1 July 2021, you can report amounts paid to closely held payees through Single Touch Payroll (STP) in one of these three ways:
1. Report actual payment by the date of payment
Whenever you make a payment to a closely held payee, report this information on each pay event. You can use this methof if you lodge your own STP reports through your ATO Online Services for Business.
2. Report actual payments quarterly when your activity statement is due
You can use this option if you have a BAS or tax agent lodge on your behalf and they already have the ATO quarterly reporting concession in place.
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 payees during the quarter and report that estimate using STP. You also need to report your PAYG Withholding and super using the estimate.
The ATO has a guide on how to determine a reasonable estimate.
If you’re reporting quarterly estimates, it’s important to not underestimate amounts to be paid, as the business may be liable for superannuation guarantee late charges and penalties.
Small employers have until the individual’s tax return due date to submit the STP finalisation declaration. For other payees, the finalisation is due on 14 July.
If you’d like help with Single Touch Payroll (STP) reporting for your closely held payees, talk to us about planning for lodgement and calculating estimates. We’ll help organise your systems, so you’re prepared for STP reporting obligations.