Closely held payees: 3 STP options for small employers

The ATO has released details of the 3 options that small employers with closely held payees will have for STP reporting purposes from 1 July 2021.

Small employers (ie those with 19 or fewer employees) with closely held payees have been exempt from reporting these payees through STP for the 2019-20 and 2020-21 financial years. However, they must commence from 1 July 2021.

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

There are 3 options provided by the ATO from 1 July 2021, namely to report:

1. actual payments on or before the date of payment – ie whenever a small employer makes a payment to a closely held payee, report the information on or before each pay event
2. actual payments quarterly – report actual payments to closely held payees quarterly. In other words, each quarter, when the activity statement is due, report all payments made in that quarter or
3. 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. There are various safe harbour provisos relating to failure to withhold penalties.