Employers with closely held payees will now have three options to report payments through Single Touch Payroll, following guidance from the ATO.
The ATO has confirmed that STP reporting for closely held payees will commence from 1 July, after it had granted these employers a one-year exemption in the midst of the pandemic last year.
Guidance released by the ATO on Monday has revealed that small employers can report payments to closely held payees through STP in three ways: reporting actual payments in real time, reporting actual payments quarterly or reporting a reasonable estimate quarterly.
The first option, reporting actual payments in real time, is in line with how employers would report information on their arm’s length employees through STP on or before each pay day.
The option to report actual payments on a quarterly basis will be due on or before the due date for quarterly business activity statements (BAS).
The final option to report a reasonable estimate quarterly will allow employers to report quarterly amounts that are equal to or greater than 25 per cent of the payee’s total gross payments and tax withheld from the previous finalised payment summary annual report (PSAR).
‘A Game Changer’
The Tax Institute’s senior advocate, Robyn Jacobson, said that while the option was welcomed, tax practitioners would need to carefully consider the implications for clients who commonly determine salaries, wages or directors’ fees after the end of the financial year.
“For those who have for many years ascertained salaries, wages or directors’ fees to closely held payees post-year-end and either amended their BAS or just dealt with the tax obligations upon lodgement of the individual tax return, this is a game changer,” Ms Jacobson told Accountants Daily.
“The ATO will not impose any failure to withhold penalties as long as you have complied with this reasonable quarterly estimate.
“There would, however, be general interest charge, and if you have not met your SG obligations, which in this case would be 28 July, then there would be SGC liabilities.
“What this does is allow a concessional approach to reporting the information through STP, and as far as PAYG withholding is concerned, you have got the ability to adjust post-year-end subject to the imposition of GIC.”
While a finalisation declaration for arm’s length employees is required by 14 July each year, the ATO will allow employers with closely held payees up to the due date of the payee’s income tax return to make a finalisation declaration.
The ATO also notes 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.
View the ATO’s guidance here.
