Date posted: 06/06/2019 5 min read

Single Touch Payroll concessions for closely held employees

Single Touch Payroll is mandatory for Australian employers from 1 July, but there’s flexibility for closely held employees.

In Brief

  • Employers in Australia with 19 or fewer employees must start reporting through STP from 1 July 2019.
  • However, STP reporting for closely held payees (family members, trust beneficiaries, directors or shareholders) does not start until 1 July 2020.
  • Employers who withhold less than A$1 million annually may be able to report closely held payee information quarterly using an STP-enabled solution.

With Single Touch Payroll (STP) now extended to employers in Australia with 19 or fewer employees, now is the time to get ready.

Small employers are required to start reporting through STP from 1 July 2019, however the Australian Taxation Office (ATO) is providing flexibility to start any time before 30 September 2019. If employers begin reporting between 1 July and 30 September, they will not need to officially apply for an extension.

STP is an important change for small employers and the ATO wants to ensure they have enough time to work out the best solution for their business. There are still questions around requirements and the ATO is working closely with employers and tax professionals to make the transition as smooth as possible.

How STP applies to closely held payees is a topic the ATO has received a number of questions about, and I’d like to provide some reassurance for payers of closely held payees.

“How STP applies to closely held payees is a topic the ATO has received a number of questions about.”
John Shepherd, ATO

What is the ATO’s definition of a closely held payee?

John ShepherdJohn Shepherd, ATO.

The ATO defines a closely held payee as anyone who is directly related to the entity from which they receive payments. For example, if you employ a family member, they would be considered a closely held payee. Directors or shareholders, and beneficiaries of a trust, are also considered closely held payees.

Reporting payments made to closely held payees each ‘payday’ under STP might be difficult as they may not be paid regularly. For example, they may take a drawing when there is cash available in the business or they may use loan accounts rather than being paid through a typical payroll process.

Flexibility for closely held payees

Recognising that payday reporting for closely held payees might be difficult, there are flexible options available:

  • You do not need to report closely held payees through STP in the 2019–20 financial year
  • You need to start reporting your closely held payees through STP from 1 July 2020
  • All other employees (arm’s-length) must be reported from 1 July 2019 or your deferred start date if one has been granted.

The ATO has also provided an extended finalisation due date for closely held payees to the due date of their income tax return.

Concessions for quarterly reporting

The ATO will be allowing some employers to report closely held payee information quarterly, at the same time as the quarterly activity statement through an STP-enabled solution. A reasonable estimate will need to be made each quarter.

The reasonable estimate can be calculated using one of the following methods:

1. Actual withdrawals, not including payments of dividends or payments which reduce the liabilities owed by the business entity to the closely held employee

2. 25% of the salary or director fees from the previous year, paid per quarter

3. Varying the previous year’s amount within 15% of the total salary for the current financial year.

However, this concession doesn’t apply to large withholders with an annual withholding of more than A$1 million, those who have not demonstrated good compliance behaviour, or those who don’t make a genuine attempt to lodge through STP.

Preparing for STP

Employers can start preparing for STP now and the first step is determining how they will report. They can choose to:

  • Report through payroll or accounting software that offers STP reporting
  • Ask a third party, such as a registered tax or BAS agent, or a payroll service provider to report on their behalf
  • Choose a no-cost or low-cost solution if they have four or fewer employee. See

It’s important to remember, if employers have any other employees who are arm’s-length, they will need to start reporting through an STP-enabled solution from 1 July 2019.

To date, more than 116,000 employers are already successfully reporting through STP, representing more than 7 million employees.

The ATO will continue to work with tax professionals and small employers to support the transition to STP. The first year of reporting will be a transition year and we will work with smaller employers to ensure they have all the information they need to help them transition smoothly.

There are a range of resources available at to support tax professionals and small employers to take the next step to STP.

Read more: