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One-year STP exemption for closely held payees

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One-year STP exemption for closely held payees

ATO director Michael Karavas

Closely held payees — such as family members — will be given a one-year exemption from Single Touch Payroll reporting, the ATO has announced.

Director Michael Karavas (pictured) said that the agency will provide an exemption for closely held payees for the 2019–2020 financial year, with STP reporting for these payees now set to commence from 1 July 2020.

The ATO’s definition of a closely held employee is one who is a non-arm’s length employee, directly related to the entity from which they receive payments, including family members of a family business, directors of a company, and shareholders or beneficiaries.

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“What we recognised here is that, generally in these circumstances, a business process of paying themselves is not a traditional payroll process,” Mr Karavas said.

“They may take a drawing when there is cash available in the business, or alternatively, you know, they might be using loan accounts and things like that.

“So recognising that a normal payroll process doesn’t work in that circumstance, we had to look at a way of being able to support real-time reporting or STP reporting for closely held payees.”

Moving forward, Mr Karavas said that the ATO will move to quarterly reporting obligations and look to align its STP approach to the current closely held lodgement concession for the PAYG withholding payment summary annual report.

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“It won’t be a pay day because lots of them don’t have regular pay days, but a once a quarter, again with the [business] activity statement,” Mr Karavas said.

“This is a recognition that there is a current practice in place,” he said, noting that many businesses see their tax agent or accountant at the end of the year and only finalise wages then. 

The ATO will be looking to provide more details around how STP reporting will affect the closely held group in the coming months, with different approaches to quarterly reporting set to be announced.

It has also released an updated list of suppliers of STP software specifically designed for small business users, some of which are already available.

Last month, Matthew Addison of the Institute of Certified Bookkeepers (ICB), one of the stakeholders involved with the development of STP, spoke to My Business about many of the myths currently circulating about Single Touch Payroll.

Mr Addison said that these stakeholders had made clear to the ATO the need for STP to fit with existing business systems and processes, such as irregular payroll within family businesses.

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One-year STP exemption for closely held payees
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