In the 2019-20 Federal Budget, the Government disclosed that Single Touch Payroll (STP) would be expanded to include additional information.
The Australian Tax Office (ATO) implemented a STP system on 1 July 2018 for employers with 20 or more employees, and 1 July 2019 for employers with 19 or fewer employees as a mandatory obligation.
STP Phase 2 reporting will commence from 1 January 2022, a six-month extension from the previously proposed 1 July 2021 start date.
This phase will require additional payroll information to be reported to the ATO, and subsequently shared with Services Australia and other government agencies.
Some of the key benefits and features of phase 2 include:
- Removing the need to send tax file numbers and withholding declaration information to the ATO
- Reducing duplication of information employers provide to the Government which will also reduce unnecessary interactions
- Reporting employee payments by income type.
The ATO has a confirmed that STP reporting for closely held payees (eg. family members of a family business, directors or shareholders of a company, beneficiaries of a trust) will commence from 1 July 2021, after it had granted these employers a one-year exemption in the midst of the pandemic last year.
From 1 July 2021, amounts paid to closely held payees will need to be reported through STP.
Amounts paid to closely held payees can be reported through STP by reporting actual payments on or before the date of payment, reporting actual payments quarterly, or reporting reasonable estimates quarterly.
For example, where director fees are based on drawings made, you could report on or before the date of the drawing, or where director fees are normally determined at year end based on drawings taken during the year. You could report actual or an estimate on a quarterly basis.
While a finalisation declaration for arm’s length employees is required by 14 July each year, the ATO will allow employers with closely held payees up to the due date of the payee’s income tax return to make a finalisation declaration.
Should you require further information, please do not hesitate to contact your Engagement Partner.