If yes, then you may be affected by the latest change to the Single Touch Payroll rules for closely held employees.
Am I Affected?
If you already use a single touch payroll system (STP) for all your employees – including family members you are unaffected and proceed with your payroll as normal.
If you do not report wages to family members/closely held employees via an STP compliant payroll system you will be required to make some changed to the way you record and report wages.
What has changed?
Previously, small business (less than 19 employees) had an exemption for reporting wages for closely held employees until 30 June 2021. From 1 July 2021, small businesses will now be required to report via STP on or before each payday or quarterly.
Is anyone else a closely held employee other than family members?
Potentially – closely held employees can be:
- family members of a family business
- directors or shareholders of a company
- beneficiaries of a trust
If I am affected, what do I need to do?
You must lodge your STP for your closely held employees via the same STP system you use for arm’s length employees.
Is there more than one option to report wages for closely held employees?
Yes – there are three options, see examples of each below:
Option 1.
Report actual payments on or before each pay date for all closely held employees the same as for arm’s length employees.
Example:
ABCD Pty Ltd has one closely held payee, who is the company director. The Director pays herself a set salary each fortnight and the amount does not change except on an annual basis. Because she has a set salary, the Director can set up a regular wages system as if she is an arm’s length employee and report actual payments on or before each payment date.
Option 2.
Report actual payments quarterly – on or before your activity statement due date. Note this is not an additional field on your activity statement, the gross payments and PAYG withheld must still be submitted from an STP compliant software system.
Example:
ABCD Pty Ltd has one closely held payee, who is the company director. Throughout the year, the director draws money from the business to use for personal expenses and promptly records this in the company books of account as loans the company has provided her. She visits her tax agent in December and June each year for assistance and during those visits they determine a director’s fee amount to pay which discharges the loan. ABCD Pty Ltd chooses to report actual payments on or before the date of payment. This is because when a payment is made, the actual amount at the time of the payment is known, and the tax agent can help lodge the STP report at the same time.
Option 3.
Report estimated amounts quarterly – on or before your activity statement due date. Report amounts equal to or greater than a percentage of gross payments and tax withheld from the latest year, across each quarter. Again, this is not an additional field on your activity statement, the gross payments and PAYG withheld must still be submitted from an STP compliant software system.
Example:
WXYZ Pty Ltd also has one closely held payee, who is the company director. Throughout the year, the director draws money from the business to use for personal expenses.
The amounts drawn from the business are wages, but the director doesn’t keep track of each transaction. This means it’s known roughly – but not exactly – how much money is drawn from the business. An exact amount won’t be known until the company’s tax agent is consulted at the end of the year. WXYZ Pty Ltd chooses to report using the reasonable estimate method. This enables the company to meet its STP reporting obligations without the director needing to visit the tax agent more often.
