Single Touch Payroll changes from 1 July 2021

The ATO has recently published a number of changes to Single Touch Payroll (STP) which will take effect on 1 July 2021. Small employees will commence to report for closely held payees, and the quarterly exemption for micro employers will generally cease. 

End of exemption for Closely held payees

Exemptions relating to reporting closely held payees through STP from 1 July 2019 for the 2019-20 AND 2021-22 income years for small employers (19 or fewer employees) will end on 30 June 2021. 

From 1 July 2021, small employers will need to report closely held payee information. 

Small employers with only closely held payees can start reporting from 1 July 2021 but does not need to inform the ATO that it has only closely held payees. 

Who are ‘Closely held payees’? 

A closely held payee is an individual who is directly related to the entity from which they receive payments, eg. family members of a family business, directors or shareholders of a company or beneficiaries of a trust. 

How to report closely held payee data

Small employers may report closely held payee information on a quarterly basis. Arm’s length employees must be reported on or before each pay event day. 

Closely held payee data can be reported in any of the following ways: 

• report on or before each pay event
• report actual payments quarterly- report payments made in each quarter when the activity statement for that quarter is due; or 
• report a reasonable estimate quarterly amount- report amounts equal to or greater than a percentage of gross payments and tax withheld from the latest year, across each quarter. 

When reporting quarterly, the employers can correct a closely held payee’s year-to-date information until the due date of the next quarterly report. If the payee will not be included in the next quarterly reporting period, the employer can either include the correct amounts in the current quarterly report or lodge an update event. 

The information required to be reported, or which the employer voluntarily reports, is the same as the information reported for arm’s length employees. 

Note: The closely held report cannot be lodged through ATO portals or as part of the activity statement. It must be lodged through an STP-enabled software solution– ie. same as for arm’s length employees. The employee can lodge it themselves or through a registered agent. 

If the employer chooses to report quarterly, they will need to check with their software providers as to how this is offered, as arm’s lengths employee data must be reported on or before the pay event date. 

Employers with arm’s length employees and also choose quarterly reporting for closely held payees will have to:

• lodge a report each pay day for the arm’s length employees and
• a closely held payee report per quarter. 

Depending on the circumstances, it may be more efficient to report closely held payee data at pay event time along with arm’s length employee data. 

How penalties may apply 

The ATO will remit any failure to withhold penalty incurred if the employer:

• reports year-to-date withholding amounts and tax withheld for a closely held payee that is equal to or greater than 25% of the payee’s total gross payment and tax withheld from the previous finalised payment summary annual report (PSAR) across each quarter of the current financial year in the employer’s quarterly STP reports;
• reports and pays the tax withheld to the ATO on time 

It is important to note that you should not under-estimate amounts reported for closely held payees. If the ATO reviews the employer’s tax affairs and identify payments to closely held payees equalling more than 25% of their total gross payments for the last financial year and did not report this STP, the employer may: 

• be liable for superannuation guarantee charge (SGC) and have to lodge SGC statements, if the employer did not make sufficient contributions during a quarter;
• not be able to tax deduct the payment 
• be liable for penalties and interest. 

Finalisation declaration for closely held payees

Small employers with only closely held payees must make a finalisation declaration by the due date of the closely held payee’s individual tax return. 

This is different to the finalisation declaration due date for arm’s length employees 

Small employers will need to ask the closely held payee about the due date for their tax return. Generally:

• self-lodgers will have a due date of 31 October
• those with a tax agent will have a due date of 15 May

Employers can make a finalisation declaration for a closely held payee at any time during the income year- eg. where the employee ceases employment. 

Micro employers- quarterly concession ends

Micro employers (employers with 4 or fewer employees) currently entitled to report through their registered tax or BAS agent on a quarterly basis will end on 30 June 2021. 

From 1 July 2021, the quarterly reporting concession will only be considered for micro employers experiencing exceptional circumstances. 

Who does the concession apply to?

To be eligible for the quarterly reporting concession, the employer must:

• be a micro employer on the day they apply
• lodge their activity statements electronically through a registered tax or BAS agent 
• have a non-computerised payroll- this could include running payroll manually and keeping records on a spreadsheet or paper;
• all amounts owing to the ATO are either not yet due or subject to a payment plan; 
• all lodgement obligations are either not yet due or subject to a deferral; and 
• from 1 July 2021- meet the guidelines for exceptional circumstances 

Exceptional Circumstances may include:

• natural disasters or other disasters/ events that may have, or have had a significant impact on individuals, regions or particular industries;
• impeded access to records
• the serious illness or death of a family member, tax professional or critical staff member 
• considerable lack of knowledge and understanding of taxation obligations; and 
• system issues, either with ATO online services or the entity’s business system

In addition, the following circumstances may be considered as exceptional:

• seasonal or intermittent workers (see below for further details)
• no or unreliable internet connection
• an inability to connect to the internet
• a connection that consistently requires multiple attempts 
• exceedingly slow data transfer 

Employers with no or intermittent internet connection may also apply for an:

• exemption via their registered tax or BAS agent or
• operational deferral- up to an additional three days to lodge 

The ATO will consider any other unique circumstances on a case-by-case basis. 

How to apply for concession:

An employer needs to apply for the concession via their registered agent. 

Quarterly reporting 

The employer’s registered agent will need to lodge the STP report on the employer’s behalf once per quarter. The due date is the same as the quarterly activity statement, or the last monthly activity statement for the relevant quarter. 

Quarterly reports must include:

• employee’s year-to-date amounts- up to and inclusive of the last pay day of the quarter 
• total gross wages- same as W1 label on activity statement and
• total PAYG withholding- same as W2 label on activity statement 

Quarterly reports could be in two formats:

• every individual pay event for the quarter or
• a single combined pay event which reports all the information for the quarter.

If the employer will not be paying any employees for the rest of the income year, they should lodge a ‘ No requirement to report’ notification via the Business Portal. 

Finalisation declaration:

The finalisation declaration can be done at any time throughout the year but needs to be completed by 14 July after year end (same as other employers). 

Seasonal and intermittent employers are eligible to lodge their STP report quarterly until 30 June 2021. From 1 July 2021, this concession will be rolled into the quarterly reporting concession for micro employers. 

Seasonal and intermittent employers are those who generally have either no employees or between 1 and 4 employees for most of the year, and then employ:

• between five and 19 seasonal or short-term employees for a 3 month period or less (months do not have to be consecutive) or
• 20 or more seasonal short-term employees as considered by the ATO on a case-by-case basis.

Employers must also meet the following conditions:

• all amounts owing to the ATO are either not yet due or subject to a payment plan and
• all lodgement obligations are either not yet due or subject to a deferral

Reference

https://taxbanter.com.au/banter-blog/single-touch-payroll-changes-from-1-july-2021/

Disclaimer

This content is intended for general information in summary form on tax and legal matters at the time of first publication and is not intended to provide, and should not be relied upon in place of appropriate professional advice.  Please consult your tax, legal and accounting advisors before acting or relying on any content provided.