With the single touch payroll (STP) system already mandatory for employers with 20 or more employees and now expanding to small employers with 19 or less employees from 1 July 2019, it is time to look at the current STP rules.
Employers with 5 to 19 employees (small employers)
Small employers are required to start reporting through STP between 1 July and 30 September 2019. If they are already using a payroll software which complies with STP, they simply need to opt into the system and start reporting any time.
If the employers won’t be ready by 30 September, they can apply directly to the Australian Taxation Office (ATO) for a deferral through the Business Portal.
Employers living in an area with limited or no internet connection can also apply to the ATO for an exemption.
Employers with 1 to 4 employees (micro employers)
The ATO has given employers with 4 or less employees who are not currently using an STP complying payroll software the following options:
Choose one of the no cost or low cost (less than $10 a month) payroll software to report; the ATO has published a list of software developers who provide these low cost simple payroll software on the ATO website at https://www.ato.gov.au/business/single-touch-payroll/in-detail/low-cost-single-touch-payroll-solutions/?=redirected_STPsolutions.
Engage their tax or BAS agents to report their STP information quarterly rather than every time they pay their employees. This option will be available until 30 June 2021.
Employers with closely held payees
A closely held payee means a person who is directly related to the entity they receive payments from including:
Family members of a family owned business
Directors and shareholders of a company
Trustees and beneficiaries of a trust
In practice, a closely held payee usually doesn’t receive a regular wage or salary, but rather draw on income from the business from time to time. Therefore, payroll information cannot be reported through STP every time a payment is made. As a result, the ATO has provided some flexible reporting options for employers with closely held payees.
Employers with 19 or less employees are exempt from reporting closely held payees in the 2019/20 financial year. The exemption is automatically granted and there is no need to apply for. However, the other arms-length employees still need to be reported through STP from 1 July 2019. The employers can also lodge payment summaries for closely held payees by the due date of their income tax returns.
From 1 July 2020, employers with 19 or less employees can report closely held payees quarterly. This report is due at the same time as their activity statements. A reasonable estimation of payments to closely held payees is required using one of following methods:
Actual withdrawal (excluding dividends and repayments of loan to the employer)
25% of director fee/salary of the previous year
Vary the previous year’s amount within 15% taking into account changes in trading conditions
If employers choose to report quarterly, they have until the due date of their income tax returns to finalise the information reported and make any adjustments.
Employers with 20 or more employees should report their closely held payees together with other arms-length employees. However, they have until 30 September 2019 to finalise information on the close held payees reported to the ATO.
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