As an accountant or bookkeeper, you might consider yourself an old hat when it comes to Single Touch Payroll (STP) by now. The ATO initiative has been around for nearly two and half years to help employers establish real-time digital payroll reporting including salaries, wages, PAYG withholding tax and superannuation information. With STP having been rolled out in stages, some small businesses have been offered exemptions from the initial deadlines. That is, up until now.
This EOFY, most small business employers will need to be STP compliant. Depending on the types of clients you work with, this means that some will have to opt in to STP for the first time, or file employees who aren’t already being reported with the ATO. The changes coming this EOFY affect those with closely held payees, and reporting concessions for other micro businesses and seasonal employers.
For the most part, small businesses (with your help) have become increasingly STP savvy, making the task at hand far less daunting than when it was first introduced. If some of your clients are feeling confused, don’t worry – there’s still time for them to get ready before 1 July. To help, we’ve compiled a breakdown of the key changes you need to know about to make the transition to STP as smooth as possible.
Remind me, what does closely held mean?
Good question. According to the ATO, a closely held payee (otherwise known as a closely held employee) is an individual directly related to the entity from which they receive payments. For example, this would include relatives in a family business or beneficiaries of a trust fund.
Depending on working arrangements, some businesses process irregular or infrequent pay runs for family members on their books. That’s why, up until 1 July of this year, small employers (with 19 or fewer payees) have been exempt from STP reporting of closely held payees.
So, what’s changing with closely held payees?
By the end of FY21, employers with fewer than 19 employees will have to report closely held salaries or wages through STP. Whether it’s a sister, great-uncle, cousin or in-law, every family member on your clients’ books count. There are three payment reporting requirements to be aware of:
- Report and process payroll through STP on or before payday
- Report the accurate payroll amount with STP once per quarter, on or before the BAS due date
- Report a reasonable estimate with STP once per quarter, on or before the BAS due date
As you know from experience, some clients prefer to process STP themselves, while others are more hands off. Of the three reporting options, there’s no one-size-fits-all approach – it comes down to what works best for you and your clients’ needs.
How can I set up STP for my clients in Xero?
Xero’s STP solution takes the hard work out of digital payroll reporting. Over at Xero Central, we’ve put together a useful guide to help you set up STP, step by step. Check out the Xero Central article on how to process closely held payees.
What do I need to know about STP Phase 2 this EOFY?
The next phase of STP aims to reduce the reporting burden on employers who need to provide information about their employees to multiple government agencies. The initial ATO Phase 2 deadline was 1 July of this year; however, it’s been deferred to 1 January 2022. In other words, don’t worry about it just yet – when the time comes, we’ll be here to help you work through it.
Are there any other changes I need to know about?
As well as small employers with closely held payees, some micro and seasonal employers will now have to report on or before the payment date – not quarterly – unless they receive a concession. This includes businesses with four or fewer employees, including those in the following industries:
- Agriculture, fishing and forestry
- Not-for-profit clubs and associations
- Seasonal and intermittent employers
Micro businesses in each category may still be eligible for STP reporting concessions, such as quarterly or exceptional circumstances exemptions. Head over to the ATO website for more details.
The STP changes for this EOFY are one of the final hurdles in transitioning your clients to a more streamlined reporting mechanism. Although the initiative is still evolving, with the support of the Xero team, you’ll be able to tackle any new changes head on.