If you’re the owner of a small home business enterprise with employees that are related to you, directors, shareholders or beneficiaries of a trust—often referred to as closely held payees— it’s unlikely that you are set up for Single Touch Payroll (STP) reporting. However, the clock is ticking and it’s time to get ready for the 2021 switch over to STP.
STP is a payroll system that works by sending employees tax information and super to the Australian Taxation Office (ATO) from your compatible payroll or accounting system with a single push of a button. All Australian employees need to integrate this system before 1 July 2021.
Most Australian businesses have already upgraded to the STP system. small businesses with less than 19 employees were exempt from using the new payroll system for the previous two financial years, but that all will change 1 July 2021.
There’s no need to notify the ATO that you’ve made the switch to Single Touch Payroll, you just need to make sure you adhere to the deadline. if you employees consist of both closely held payees and those that are not directly associated with the payers (known as arm’s length payees), you will be required to report on the arm’s length employees through STP prior to wages being paid each week/fortnight or month.
If you only employee closely held payees, the ATO has several options available to make reporting easier.
Small businesses will be able to
- Report payments on the day of, or prior to pay day
- Quarterly reports
- Estimate quarterly
The quarterly reports for those on the payroll will need to include year-to-date amounts, ordinary time earnings, superannuation payments, total amount of wages being reported and the gross PAYG payments.
The quarterly reports will be due prior to the quarterly deadline and will have no effect on the due dates for paying PAYG, submitting BAS or paying super contributions for your closely held employees.
Keep in mind, if you are using the estimation method, you are required to report amounts equal or greater than the percentage of gross payments and PAYG withheld from the most recent financial year across each quarter. Failure to report year-to-date holding amounts that are equal to or greater than the total gross payments and tax withheld will result in penalties.
Amendments can be paid to closely-held employees in a quarterly STP report can be made until the deadline of the next quarterly report. Employers may lodge updated activity statements with the corrected year-to-date amounts for employees.
If you’re completely confused about how to set up Single Touch Payroll, due dates and how to make it all happen before you face penalties, make sure you contact us well before the switch over date of 1 July 2021. Our tax accountants can help you with all your Single Touch Payroll requirements.