As a small business owner, you’ve likely heard about Single Touch Payroll (STP) by now. For nearly two and a half years, the ATO initiative has helped Australia’s small businesses digitally report payroll, including salaries, wages, PAYG withholding tax and superannuation information. Many employers will already be using STP. However, with the ATO rolling the initiative out in stages, there are still some that have been offered exemptions. That is, until now.
From 1 July this year, most small businesses will need to be STP compliant. This includes small employers with closely held payees, as well as some micro businesses and seasonal employers. The changes could mean that you have to opt in to STP for the first time, or start filing employees who aren’t already being reported with the ATO. If you’re feeling unsure about whether these changes will affect your business, we’ve compiled all the information you need to help determine your next steps.
Although EOFY is just around the corner, there’s still time to get prepared. With the help of your advisor and the Xero team, together, we can 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 your 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 how my business remunerates 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 your sister, great-uncle, cousin or in-law, every family member on your books, counts. 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
Out of the three reporting options, there’s no one-size-fits-all approach – it comes down to what works best for your business’ needs.
Does my advisor know about changes to STP, and can they help?
Absolutely. Most bookkeepers and accountants are STP old hats now, making them the experts in navigating updates and changes. With EOFY fast approaching, it’s best to reach out to them sooner rather than later to talk through the reporting option that’s right for you, and any steps you need to be aware of before 1 July.
If you don’t already have an advisor, our Xero Advisor Directory can help find one, with thousands of bookkeepers and accountants listed by location and industry. Not only can they help you with STP, they can offer plenty of value in all areas of your business throughout the new financial year.
How can I set up STP reporting in Xero?
Whether your advisor takes care of reporting or you’re tackling it solo, Xero’s STP solution takes the hard work out of digital payroll. Over at Xero Central, we’ve put together a useful guide to help you set up STP, step by step, as well as how to process closely held payees. We also have a range of subscription options on offer, including payroll only. Head over to our plans page to find one that’s right for you.
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. Ask your advisor about how you can apply for a concession, and head over to the ATO website for more details.
The STP changes for this EOFY are one of the final hurdles in transitioning most Australian small businesses to a more streamlined reporting system. Although the initiative is still evolving, with the support of the Xero team and your trusted advisor, you’ll be able to tackle any new changes head on.