“Small and family businesses are the engine room of our economy” – Scott Morrison has been repeating this statement over the last year during the pandemic. There are a number of measures in place to support these businesses. One of them is to postpone the Single Touch Payroll (STP) reporting obligation for closely held payees until 30 June 2021.
However, this date is creeping up soon, which means from the 1 July 2021, closely held payees will need to start reporting payroll through STP.
What is Single Touch Payroll (STP)?
STP is an initiative to reduce employers’ payroll reporting burdens to the government agencies.
STP works by sending tax and super information from your STP-enabled accounting software to the ATO as you run your payroll.
If your employees have a myGov account, they will be able to see their year-to-date tax and super information in their Income statement. This information is updated every time you report.
If you are a small business that has been hiring non-family member employees you would have needed to start reporting via STP since 1 July 2018 or 1 July 2019, depending on the size of your business.
Initially, all businesses were required to report via STP by 1 July 2019. However, due to the pandemic, the ATO has postponed the obligation to report for closely held payees.
Who are Closely Held Payees?
- family members of the business
- directors or shareholders of a company
- beneficiaries of a trust to 1 July 2021
These are the 3 options to report these amounts to the ATO.
- Report actual payments on or before the date of payment.
- Report actual payments quarterly. Report this amount before your quarterly BAS due date.
- Report a reasonable estimate quarterly. Report an amount equal to or greater than 25% of gross payments and tax withheld from the previous Payment Summary Annual Report (PSAR), before your quarterly BAS due date.
Reporting your obligations quarterly does not change the due date for your BAS and superannuation payment, so make sure you have these reminders in your calendar.
An important note here is that STP reports will need to be lodged through an STP-enabled solution and cannot be lodged through the ATO portals or through a BAS.
Finalisation declaration due date
For those hiring arm’s length employees (ie non-closely held payees), the finalisation of STP is 14 days following the end of the financial year. Your employee will see the Income Statement marked as “Tax Ready” and this means that it is ready for them to lodge their tax returns.
For those with only closely held payees, you have until the due date of the closely held payee’s individual income tax return to make the finalisation declaration. This could mean 15 May in the following financial year if they are using a tax agent to lodge their tax returns.
You will no longer need to submit an annual payment summary report.
What to do before 1 July 2021
It is important to make sure that you are ready to report via STP before 1 July 2021.
- Ensure that you have an STP-enabled accounting software. Make sure that it is connected to ATO.
- Gather all the relevant information on the individual you are paying to. You would need their full legal name, tax file number, date of birth, addresses, superannuation details and bank account details.
- Confirm their pay rate and pay period.
- Draft up the first payslip for review.
- Get ready to submit their first payroll after 1 July 2021.
The team at Link Advisors are experts in this field. Reach out to them if you have any questions!