As of 1 July 2021, businesses are required to report payments to closely held employees through the Single Touch Payroll (STP) system.
Most businesses are already using STP to report wages payments to arm’s length employees. However, there are currently 2 exemptions for STP reporting which end on 30 June 2021:
- Businesses with closely held (related) employees
- Employers with a Withholding Payer Number (WPN)
Many medical businesses who pay the doctor’s spouse a wage for administrative work for the business have been using the current STP exemption. Additionally, doctors who work as employees only and pay a nanny with a WPN (as they aren’t eligible for an ABN) have also been using the current exemption.
STP is a government initiative which allows employers to streamline payroll by sending tax and super information to the ATO from a third party or your payroll or accounting software. This reporting increases the transparency of payroll data. Data matching allows the ATO to match up information about employer payments and tax information received from superannuation funds. The ATO can track whether employers are meeting their tax obligations to ensure omissions are minimised.
Changes to reporting
The legislation requires all payroll information to be lodged with compliant payroll or accounting software. When an employee’s pay is processed, all tax and super information will be sent to the ATO from the STP software.
This will affect how employers produce payment summaries and report superannuation information:
- Payment summaries – Employers will no longer need to provide employees with a PAYG Payment Summary. This will be accessible by employees through myGov.
- Superannuation information – Employers must report the employee’s super liability based on amounts currently provided on the employee’s payslip.
Ways to report payments to closely held payees
The ATO have announced that payments to closely held payees can be reported through STP in any of the following ways:
- Report actual payments on or before date of payment – this is the same as reporting payments for arm’s length employees.
- Report actual payments quarterly – the quarterly report will be due on or before the due date for quarterly activity statements.
- Report a reasonable estimate quarterly – the estimate must be based on the prior year payment summary. The ATO will not apply penalties if the year-to-date information is equal to or greater than 25% of the payee’s gross payments and tax withheld from the previous year. You must make any corrections by the due date of the last quarterly report once the actual payments to employees are known.
No cost and low cost STP solutions
Software providers have been asked to develop low-cost solutions and simple software which can be utilised on mobile phone apps and portals. These solutions best suit micro employers who employ between one to four employees and do not currently have payroll software.
The ATO has compiled the following list of currently available products:
|SOLUTION NAME / COMPANY||SOLUTION TYPE||PRICING||WEBSITE|
AccXite Australia Pty Ltd
|Free until 31 December 2019
From 1 January 2020 $10 a month
|Desktop||$10 or less per month||www.cashflow-manager.com.au/wages1-4|
CloudPayroll Pty Ltd
|$10 or less per month||www.cloudpayroll.com.au/micro|
|Cloud||$10 or less per month||www.epayroll.com.au/micro|
|Free Accounting Software
Free Accounting Software Pty Ltd
|STP – Data
Single Touch Pty Ltd
|$10 or less per month||www.singletouch.com.au|
We have listed some extra guidelines for employers that use the following:
- Online payroll software – Ensure that STP reporting will be available by the current software provider.
- Desktop payroll software – Find a service that can upload and submit payroll reports in an ATO required format.
- Spreadsheets or pen and paper – Find a service to convert the data to a compliant digital report format and submit to the ATO.
If you would like to learn more about how to ensure compliance with Single Touch Payroll guidelines, please contact Kristy Baxter or phone (07) 3023 1300.