Most employers now report payroll information to the ATO each pay day using Single Touch Payroll (‘STP’) enabled software. However, small employers (19 or fewer employees) are currently exempt from reporting ‘closely held’ (related) payees through STP.
Also, a quarterly STP reporting option applies to micro employers (1 to 4 employees), micro seasonal and intermittent employers, and micro employers in the agricultural, fishing and forestry industries. These concessions will end on 30 June 2021.
The ATO recently released information about the STP reporting changes that will apply for these small and micro employers from 1 July 2021, which is summarised as follows:
Reporting closely held payees (small employers)
From 1 July 2021, small employers must report payments made to closely held payees through STP using any of the options set out below. Information about all other employees (known as ‘arm's length employees’) must continue to be reported on or before each pay day.
A ‘closely held payee’ is an individual who is directly related to the entity from which they receive payments, for example:
- family members of a family business;
- directors or shareholders of a company; and
- beneficiaries of a trust.
Payments to closely held payees can be reported via STP (from 1 July 2021) using any of the following three options:
- Report actual payments on or before the date of payment.
- Report actual payments to closely held payees quarterly, on or before the due date for the employer’s quarterly activity statements.
- Report a reasonable estimate quarterly, on or before the due date for the employer’s quarterly activity statements. Broadly, this option requires employers to report amounts equal to or greater than a percentage of gross payments and tax withheld from the latest year, across each quarter.
Employers that use Option 3 must ensure they do not under-estimate amounts reported for their closely held payees.
If the ATO reviews the employer’s tax affairs and identifies that they made payments to closely held payees equaling more than 25% of their total gross payments for the last financial year and did not report this through STP, the employer may:
- be liable for super guarantee charge (‘SGC’) and have to lodge SGC statements, if they did not make sufficient contributions during a quarter;
- not be able to deduct the payment made for income tax;
- be liable for penalties and interest.
Small employers with only closely held payees have up until the due date of the payee’s individual income tax return to make a finalisation declaration. Therefore, employers will need to speak with closely held payees about when their individual income tax return is due.
From 1 July 2021, the quarterly reporting concession will only be considered for eligible micro employers experiencing ‘exceptional circumstances’. Law Administration Practice Statement 2011/15 (‘PS LA 2011/15’) sets out the Commissioner’s views on when it would generally be fair and reasonable to grant a deferral due to exceptional or unforeseen circumstances. Common examples include natural disasters or other disasters or events or serious illness or death.
In addition to the circumstances set out in PS LA 2011/15, the following circumstances may also be considered exceptional when considering an application for the quarterly reporting concession from 1 July 2021:
- Seasonal or intermittent workers – where an employer has either no or between one and four employees for most of the year and then increases their workforce for less than three months of the year.
- No or unreliable internet connection – for example, an inability to connect to the internet, a connection that consistently requires multiple attempts, consistent dropouts or disconnections, or exceedingly slow data transfer.
The ATO also says it will consider any other unique circumstances on a case-by-case basis. It should be noted that registered agents will need to apply for this concession and lodge STP reports, quarterly, on behalf of their eligible micro employer clients.
The STP reports are due the same day as the client’s quarterly activity statements. If a client lodges activity statements monthly, the quarterly STP reports are due the same day as their last monthly activity statement for the particular quarter. If an eligible client prefers to report monthly (rather than quarterly), the monthly STP reports must be lodged on or before the 21st day of the following month. This is the same due date as monthly activity statements.
Finalisation declarations will need to be submitted by 14 July each year. The ATO has advised it is not currently accepting applications for this concession. The ATO website will be updated when applications can be made.
If you require assistance with your STP obligations or want to know more, please contact our experts on +61 7 3218 3900 or use the form below:
References: Ref: ATO website, ‘Small employers – closely held (related) payees’, 8 February 2021
ATO website, Micro employers, 8 February 2021
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