Small employers – closely held (related) payees

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  • 25 July 2021

Small employers (19 or fewer payees) were exempt from reporting amounts paid to closely held payees through STP until 30 June 2021.

Amounts paid to closely held payees from 1 July 2021 need to be reported through STP. If you are a small employer you can report these amounts on or before each pay day, or you can choose to report this information quarterly.

If you have any other payees (also known as arm’s length employees) they must be reported on or before each payday.

Different arrangements apply for businesses with 20 or more payees.

STP reporting for closely held payees

A closely held payee is an individual directly related to the entity from which they receive payments.

For example:

  • family members of a family business
  • directors or shareholders of a company
  • beneficiaries of a trust.

You must continue to report information about all of your other employees (known as arm’s length employees) via STP on or before each payday (the statutory due date).

Ways to report amounts paid to your closely held payees:

Amounts paid to closely held payees from 1 July 2021 can be reported through STP in any of the following ways:

Report actual payments on or before the date of payment – whenever you make a payment to a closely held payee, report the information on or before each pay event.

Report actual payments quarterly – report your actual payments to closely held payees quarterly. Each quarter, when your activity statement is due, report all payments made in that quarter.

Report a reasonable estimate quarterly – for each quarter report amounts equal to or greater than a percentage of gross payments and tax withheld from the latest year. Choosing how you report.

You can choose which reporting methods you want to use. Not all reporting methods will suit your business circumstances.

If you can report actual payments you should report either quarterly or on or before the date of payment.

 

Example 1:

ABCD Pty Ltd has one closely held payee, who is the company director.

Throughout the year, the director draws money from the business to use for personal expenses and promptly records this in the company books of account as loans the company has provided her.

The director visits her tax agent in December and June each year for assistance and during those visits they determine a director's fee amount to pay which discharges the loan.

ABCD Pty Ltd chooses to report actual payments on or before the date of payment. This is because when a payment is made, the actual amount at the time of the payment is known, and the tax agent can help lodge the STP report at the same time.

Example 2:

WXYZ Pty Ltd also has one closely held payee, who is the company director.

Throughout the year, the director draws money from the business to use for personal expenses.

The amounts drawn from the business are wages, but the director doesn’t keep track of each transaction. This means it's known roughly – but not exactly – how much money is drawn from the business. An exact amount won't be known until the company's tax agent is consulted at the end of the year.

WXYZ Pty Ltd chooses to report using the reasonable estimate method. This enables the company to meet its STP reporting obligations without the director needing to visit the tax agent more often.