Single Touch Payroll reporting will be mandatory for closely held payees from July 1 this year. What does it mean for your business?
Firstly, what is a ‘closely held payee’?
A closely held payee is someone who is directly related to the business such as a family member of the family business, directors or shareholders and, beneficiaries of a trust. All other employees are called arms-length employees.
If you’re an employer with 19 or fewer payees you can report the amount on or before each payday, or you have the choice to report that information quarterly.
Your other arms-length employees don’t get this choice and that amount must be reported on or before payday. If your business has 20 or more payees, different rules apply.
Choosing how you report
Not every reporting method will suit your business, and there are multiple options to choose from.
If you know the actual amount paid, this can be reported on or before each pay event.
You can also opt to report the actual amount quarterly when your activity statement is due.
The third option is to report quarterly an amount equal to or greater than a percentage of gross payments and tax withheld from the latest year, across each quarter.
Reporting payments on or before payday
This method allows small employers to report amounts paid to their closely held payees on or before payday.
Keep in mind, other employees (arm’s length employees) amounts must be reported this way. If you chose this method, the rules for reporting in Single Touch Payroll apply while still having time to make a finalisation declaration for those closely held payees.
You must still include any PAYG withholding amounts on your activity statement and finalise the payment you owe the ATO by the due date.
You must also make super guarantee contributions for your closely held payees before the quarterly due date.
Report actual payments quarterly
While this option enables small employers to report the total amounts paid to closely held payees quarterly, you will still need to include any PAYG withholding amounts on your activity statement and the amount you owe the ATO by the due date, as well as super guarantee contribution before the quarterly due date.
Report a Reasonable Estimate Quarterly
For this option to be viable for you, you must make a realistic estimate of the dollar amount paid to the payees throughout the quarter and report that through Single Touch Payroll.
You should also do what is required in the last two options by reporting and paying withholding PAYG and contributing super guarantee based on your estimate. To determine a reasonable estimate, speak to an experienced accountant and check the ATO website for detailed instructions.
Get advice
To ensure you manage closely held payees correctly and remain compliant, get advice from an experienced accountant.
Contact the team at Nitschke Nancarrow for a no obligation discussion about your situation.
The information contained on this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.
