Advice on Closely Held Payees

I apologize if this has been covered elsewhere. My husband & I are a partnership that only employ one apprentice. We will have to move to STP reporting for closely held payees from 1 July. I have previously been putting payments to our personal bank account through ‘Private Expenses’. I gather I will have to set us both up as employees, but will I need to do payslips every time I transfer $ to keep everything balanced and for the STP worksheet - or is there an easier way to do this? Thanks in advance.

The start date for STP Phase Two will be 1st January 2022 - Single Touch Payroll | Australian Taxation Office

The developer will need to work out the best way to allow for the reporting of partners drawings if they prefer to avoid becoming an employee of their partnership. Perhaps new payslip items may be linked to a capital account sub-account such as partners drawings instead of a wages expense account.

Thanks Tony. Well this is so confusing. I got an email from the ATO today, directed to our ABN and partnership, stating that we (small employees with closely held payees) have until 1 July 2021 to start reporting through STP. I would definitely prefer not to put us as employees. We pay tax as individuals and reportable employer super contributions are not applicable (we make personal super contributions as individuals). I wonder if anyone else is in this situation?

Are you reporting your apprentices wages via STP?
I suspect you have until 1 July 2021 to do that.
Manager already support this via Single Touch Payroll Worksheet | Manager

I suspect at that time you will may also have to also report the income of the business owner via STP

I was told on the phone (ATO) that I could start reporting both the apprentice & closely held payees on 1 July 2021. I have got STP loaded on Manager & have played around with it. Why is the Payroll code so long? Is there any way of changing this? Can a different product be used instead of singletouch.com.au? Will there be an update to STP on Manager to cater for closely held payees? As they are not employees, but receive payments. Looks like closely held payees can be reported qrtly, but employees must be real-time reporting from 1 Jul 21. Can’t believe how much extra work this has created!

Because you have not entered a “Code” for that employee (you have left that field blank).

  • Go to Employees tab → For each employee the “Code” you have or have not entered is shown
  • Click on edit and enter the employee number you would like used for that employee

That would involve you not using Manager for payroll

Hopefully before it is required to be used

Yep
Electronic reporting helps government central automated monitoring but creates significant extra work for small businesses. Fortunately after it is all set up it is not as bad.

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According to an STP specialist from the ATO, payments to closely held payees such as partners drawings or beneficiary drawings will not require reporting if the payments are unrelated to wages or directors fees subject to PAYG withholding and are merely drawings in advance of receiving a partners share of profits or an income distribution from the trust. Hopefully this advice will not change because the advice received from several people at the ATO was inconsistent.

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Thanks Tony. Exactly my findings too. I spoke to two different people. First one thought we had to, but didn’t seem to have much idea and couldn’t really answer my questions. After lots of research on their website, I phoned again. Second person put me on hold several times and then “didn’t think” we had to, but also obviously didn’t know much. Then I posted the questions on the ATO Community and an ATO representative gave me (hopefully) the correct advice (I kept a copy of the post for evidence :smile:). A partnership does not have to report, but as our apprentice is also our son, he is classed as a closely held payee. I will have to do STP for him from 1 July 2021 and will only have to report quarterly (thankfully).

I should add that Manager will handle my STP reporting just fine as it is.

@Maree_M, in relation to your son who is an employee, STP started 1 July 2019 for employers with 19 or fewer employees.

This is what the ATO told me: “However, your son would be considered a closely held payee. Due to this, as long as you have less than 19 employees, you can follow the concessional reporting options for a closely held payee. If you only have closely held payees you’re not required to start STP reporting until 1st July 2021. After this date your options are to report actual payments on/before the payment date, quarterly, or you can report a reasonable estimate quarterly.”

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