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  • Small employers – closely held (related) payees

    Small employers (19 or fewer employees) are exempt from reporting closely held payees through Single Touch Payroll (STP) until 30 June 2021. You don't need to apply for this exemption.

    From 1 July 2021, closely held payees will need to be reported through STP. You have the option to report this information on a quarterly basis.

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

    On this page:

    STP reporting for closely held payees

    Small employers with closely held payees were exempt from reporting these payees through STP for the 2019–20 and 2020–21 financial years. From 1 July 2021, you must report payments made to closely held payees through STP.

    A closely held payee is an individual who is 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 pay day (the statutory due date).

    If you only have closely held payees you are not required to start STP reporting until 1 July 2021. You do not need to tell us that you only have closely held payees.

    Ways to report your closely held payees

    From 1 July 2021, you can report payments to closely held payees 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 – report amounts equal to or greater than a percentage of gross payments and tax withheld from the latest year, across each quarter.

    Report actual payments quarterly

    Small employers can choose to report any closely held payees on a quarterly basis.

    If you choose a quarterly reporting option for your closely held payees, your quarterly STP report is due on or before the due date for quarterly activity statements. This is inclusive of any concessions which may apply to your circumstances.

    This quarterly option does not change the due date for:

    • notifying and paying your pay as you go (PAYG) withholding on your activity statement
    • making super guarantee contributions for your closely held payees.

    You must continue to report information about all of your other employees via STP on or before pay day.

    If you are a medium withholder reporting your PAYG withholding monthly, you need to determine the quarterly activity statement due date that applies to your circumstances.

    See also:

    Report a reasonable estimate quarterly

    This reporting option allows you to report reasonable year-to-date amounts for your closely held payees quarterly.

    We will remit any failure to withhold penalty you may incur if you:

    • report 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 payments and tax withheld from the previous finalised payment summary annual report (PSAR) across each quarter of the current financial year in your quarterly STP reports
    • report and pay the tax withheld to us on time.

    It is important you do not under-estimate amounts reported for your closely held payees. If we review your tax affairs and identify that you made payments to closely held payees equalling more that 25% of their total gross payments for the last financial year and did not report this through STP, you may:

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

    It is important that your quarterly STP reports are a true and correct representation of your PAYG withholding and super guarantee obligations for that quarter at the time they are lodged.

    Example

    Jyla Pty Ltd chooses to start STP reporting for their closely held payee using the reasonable estimate method from 1 July 2021 (quarter 1 2021–22).

    They use a 25% estimate based on the payee's last payment summary of $100,000 in the 2020–21 financial year.

    Jyla Pty Ltd reports $25,000 each quarter for the first three quarters of the financial year. But when they get to quarter 4, they realise the payee will receive $120,000 for the year (not $100,000 as estimated). They choose to correct this in their quarter 4 STP pay event. They report $45,000 for this quarter to bring the year to date total up to $120,000.

    They then report $30,000 each quarter in the 2022–23 financial year, based on the $120,000 reported for the 2021–22 year.

    Payment summary:

    • 2020–21 financial year $100,000
    • 2021–22 financial year $120,000.

    STP reports – year to date amounts

    Quarter

    2021–22

    2022–23

    Q1

    $25,000

    $30,000

    Q2

    $50,000

    $60,000

    Q3

    $75,000

    $90,000

    Q4

    $120,000

    $120,000

    * Assuming no corrections need to be made in that year.

    End of example

    See also:

    Correcting information about a closely held payee

    When reporting quarterly you have until the due date of your next quarterly STP report to correct a closely held payee’s year-to-date information. This is when you identify a need for a correction (or fix) throughout the financial year.

    If a closely held payee will not be included in your next quarterly STP report, you must either:

    • include them in your current quarterly STP report with corrected year to date amounts, or
    • lodge an Update event by the relevant due date for quarterly activity statement with the corrected year to date amount for the payee.

    Example:

    Mentois Pty Ltd lodge their STP report with $0 for their closely held payee in quarters 1 and 2.

    In quarter 3, they identify a payment was made to the payee in quarter 1 but the payee has left and won't receive any further payments.

    To correct the information, Mentois Pty Ltd submit an Update event. They ensure they include the correct year to date amounts for payments made, amounts withheld and superannuation liabilities that apply.

    End of example

    See also:

    What you need to report

    Like any STP reporting for arm's length employees, your quarterly STP report for your closely held payees is required to include:

    • year-to-date amounts, up to and including the last day of the quarter, for each closely held payee who received a payment subject to withholding that is required to be reported via STP
    • the payee's ordinary times earnings (OTE) or your superannuation liability for the payee
    • your total gross wages for payments being reported – same as the W1 label on your activity statement
    • your total pay as you go withholding payments being reported – same as the W2 label on your activity statement.

    You also have the option of including any voluntary reportable withholding amounts in your quarterly STP report that you paid to a closely held payee during the quarter, if applicable.

    You may be subject to a penalty if you do not report all payments subject to withholding made to a closely held payee during a quarter by the quarterly due date.

    See also:

    Finalisation declaration due date for a closely held payee

    Small employers with only closely held payees have up until the due date of the closely held payee’s individual income tax return to make a finalisation declaration for a closely held payee.

    You need to speak with the closely held payee about when their individual income tax return is due.

    You can make a finalisation declaration for a closely held payee at any time during the financial year (for example, for closely held payees who have ceased employment).

    You must make a finalisation declaration for arm's length employees by 14 July.

    See also:

    How to lodge the quarterly STP report

    You need to lodge your STP report for closely held payees through an STP-enabled solution, the same as for any arm's length employees. You can either lodge the report yourself or have your registered agent lodge it on your behalf.

    If you also have arm’s length employees, you will lodge:

    • a report each pay day for your arm’s length employees
    • at least one STP report per quarter which includes your closely held payees.

    Depending on your STP reporting solution, your report may include both your arm's length employees and your closely held payees.

    The STP report can't be lodged through ATO portals. It is not an additional label on your activity statement.

    Speak to your STP solution provider to see how they offer quarterly reporting.

    See also:

    Last modified: 08 Feb 2021QC 59387