The ATO has confirmed that businesses with closely held employees will be granted a one-year exemption – from the 01 July 2019 STP reporting commencement deadline.  

The definition of a closely held employee is a person who is a not an arm’s length employee.  They are often related to the entity from which they receive a personal income, for example, Mum’s and Dad’s businesses.  In this case two married adults may be Directors of a company and shareholders or beneficiaries and, they may employee family members, who may also be shareholders or beneficiaries.

The ATO recognizes that closely held employees often are not paid on a regular basis or paid a regular recurring amount.   In order to reach a middle ground, the ATO will apply various methods that allow employers to a make reasonable estimate of the wages paid – allowing them to report something on a quarterly basis.

If you are running a company or trust with closely held employees, often payments are made via personal drawings.  In this case, the ATO will allow employers to calculate the payment amount by assessing:

1. the withdrawals, not including payments of dividends (which reduces the liabilities owed by the business entity to the closely held employee)
2. 25% of the salary or Director fees from the previous year, per quarter
3. By varying the previous years’ amount within 15 per cent of the total salary for the current financial year.

If as a company you choose to adopt one of the above quarterly reporting methods, the ATO will deem that you have tried to meet your STP obligations.  That will allow you to finalize the reporting and make any adjustments when preparing your company return.

While other businesses will have to provide a finalization declaration annually, by the 14^th July, the ATO has granted an extension to closely held payees to the due date of their income tax return.  It is also expected that STP reported income will be available through pre-fill for that person’s tax return.

If you have any questions or need advice and clarity on STP reporting, feel free to contact Semmens & Co on 03 8320 0320 for a free consultation.

If you’re looking for more information on how to maximize tax benefits for your business, download our e-book Top 9 Tax Tips That Could Save You Thousands or, learn more about these strategies by registering to attend our webinar.