Updated: Jun 28
Single Touch Payroll – Changes from 1 July 2021
Are you running a small business and have not been reporting the wages of family members (closely-held employees) through Single Touch Payroll (STP) yet? If yes, then get ready because this will change from 1 July 2021.
So, let’s do a recap. What is Single Touch Payroll?
Up until a couple of years ago businesses would send copies of their employees’ Payment Summaries to the Australian Taxation Office (ATO) on an annual basis.
This has changed. Businesses now report the salaries and wages they have paid, along with their superannuation obligations, to the ATO each time they record and pay their wages unless they have been granted a deferral or exemption.
The process has been implemented in stages depending on the number of employees the organisation has and depending on whether or not the employees were regarded as “closely-held”. Closely-held employees consist of family members, company directors, and trust beneficiaries. Changes from 1 July 2021 From 1 July every business will need to be on board and report amounts paid to all employees.
If you're a small employer you can report the amounts paid to closely-held employees on or before each payday, or you can choose to report this information quarterly. If you choose to report quarterly then the reporting can be an actual payment amount or a reasonable estimate. If you have any other payees they must be reported on or before each payday. Reporting a “Reasonable Amount” Ok, so if you can report a “reasonable estimate” what does this actually mean?
If you think your circumstances are similar to last year, you can look at what you paid yourself and any other family members in that financial year, and use this as a basis for the current year. When you report your wages to the ATO each quarter include 25% of last year's total. Overstated Wages using “Reasonable Estimate”? If you use this method and you get to the end of financial year and find that your estimated wages were incorrect, what should you do? You have a couple of options:-
1. If you've paid too much PAYG withholding, you can revise your activity statements to claim back the excess by either:
revising each quarter to the correct PAYG withholding amount
reducing the PAYG withholding amount reported in Quarter 4 by the amount of the excess – and working backwards to earlier quarters if the excess is higher than the amount reported in Quarter 4.
2. Do nothing. Your closely held payees will be entitled to a credit for the PAYG withholding that relates to them when they complete their personal income tax return.
Overpaid Superannuation If you have overpaid the wages throughout the year it probably means that you have contributed too much super. You can try and get a refund but it may be difficult. If you can't obtain a refund from their super fund, you can count the excess towards the contributions you have to pay for the current quarter or a future quarter, as long as:
it's for the same closely held payee, and
the start of the quarter is within one year after the date you paid the excess amount to the super fund.
How and When to Lodge Quarterly STP Report One aspect of STP that can confuse business owners is understanding that STP is not reported on your quarterly BAS. It cannot be lodged via the tax or business portal. You need to have an online software which can record the wages and transmit the information to the ATO.
If you choose the quarterly reporting option, your quarterly STP report is due on or before the due date for your quarterly activity statements.
If you report your PAYG withholding on monthly activity statements, your quarterly STP report including amounts paid to your closely held payees is due on the same day as your activity statement for the final month of the quarter.
Remember, monthly or quarterly reporting relates only to the employees who are defined as closely-held. All other employees must have their wages information reported to the ATO either before, or on, the day they are paid. Year End finalisation declaration for closely held payees Small employers with only closely held payees have until the date their tax return is due to make a finalisation declaration for a closely held payee. For all other employees the finalisation declaration needs to be made by 14 July.
If you have been estimating the wages throughout the year you will need to update the STP at the end of the year so that it reflects the actual wages you paid and not just the estimates.
Need help with implementation or have any questions? Give Mary-Louise a call on 0422 391 370.