ATO director Michael Karavas said the agency will provide an exemption for closely held payees for the 2019-20 financial year, with STP reporting for these payees to commence from 1 July 2020.
The ATO’s definition of a closely held employee is one who is a non-arm’s length employee, directly related to the entity from which they receive payments, including family members of a family business, directors of a company and shareholders or beneficiaries.
“What we recognised here is that generally in these circumstances a business process of paying themselves is not a traditional payroll process,” said Mr Karavas.
“They may take a drawing when there is cash available in the business, or alternatively you know they might be using loan accounts and things like that.
“So recognising that a normal payroll process doesn’t work in that circumstance, we had to look at a way of being able to support real time reporting or STP reporting for closely held payees.”
Moving forward, Mr Karavas said the ATO will move to quarterly reporting obligations and look to align its STP approach to the current closely held lodgment concession for the PAYG withholding payment summary annual report.
“It won’t be a pay day because lots of them don’t have regular pay days but a once a quarter again with the activity statement,” said Mr Karavas.
“This is a recognition that there is a current practice in place, about where directors when they go see their tax agent and accountant to do the tax return at the end of the year they finalise what their salary and wages are at that point in time.”
The ATO will be looking to provide more details around how STP reporting will affect the closely held group in the coming months, with different approaches to quarterly reporting set to be announced.