Closely held Payees

The ATO’s definition of 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, or beneficiaries of a trust.

Previously the ATO provided an exemption to Single Touch Payroll (STP) reporting for closely held payees until 30 June 2021. From 1 July 2021, employers must report payments made to closely held payees through STP. The ATO has released guidance on the options available for reporting:

1. Report actual payments - when processing a payment to closely held payees report STP in real time on or before the pay day.

2. Report actual payments quarterly - report actual payments made to closely held payees on a quarterly basis on or before the due date for quarterly business activity statements (BAS).

3. A reasonable estimate quarterly - report quarterly amounts that are equal to, or greater than, 25 per cent of the payee’s total gross payments and tax withheld from the previous finalised payment summary annual report (PSAR). For example, an annual estimate gross wage of $50,000 equates to $12,500 gross wages each quarter.

The ATO usually require a finalisation declaration for employees by the 14 July each year (running a final event on STP). However, they will allow employers with closely held payees up to the due date of the payee’s income tax return, to make a finalisation declaration.

It is important to note that employers must continue to report information about all other employees (known as arm’s length employees) via STP as per normal.

CloudPayroll supports all of the above options from the ATO. Employers do not need to wait until 1 July 2021 to start reporting to the ATO. With CloudPayroll you can start immediately ensuring full compliance.

Contact our helpful Sales Team who will demonstrate how to process each option so you can see what will best suit your business needs.

For more information from the ATO on reporting closely held payees through STP visit their website.

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