As part of the changes announced by the ATO in Phase 2 of its Single Touch Payroll (STP) rollout, from July 1 this year, closely held employees will no longer be exempt from STP reporting.
What is a closely held employee?
A closely held employee in an individual that is directly related to the employer. There are three categories of closely held employees, as defined by the ATO:
- family members of a family business
- directors or shareholders in the company
- trust fund beneficiaries
Employers with 19 or fewer staff have been required to undertake STP reporting for their staff since July 1, 2019, but closely held employees did not need to be included, until now.
What is Single Touch Payroll (STP)?
With Single Touch Payroll, employers report their employees’ payroll information to the ATO every time their employees are paid. This is done through STP-enabled software, and includes payment information such as wages, PAYG withholding, and super contributions.
STP reporting became mandatory for businesses with 20 or more employees on July 1, 2018, and for business with 19 or fewer employees a year later.
Typically, payments are reported through STP each payday, but for closely held employees, businesses will be permitted to report those payments on a quarterly basis if they prefer to do so.
Options for STP reporting for closely held employees
Small businesses will have three options for STP reporting for closely held employees:
- They can report actual payments on or before the date of payment
- Actual payments on a quarterly basis, or
- A reasonable estimate on the amount paid on a quarterly basis
For businesses, such as small or micro family businesses that only consist of closely held employees, the quarterly option might be preferable, but for businesses with a mix of closely held and regular employees, it may be preferable to use the same reporting method for all employees in order to streamline the process. Closely held employees must always be identified as such in the reporting process, regardless of which reporting option you choose.
Potential penalties for non-compliance with STP reporting requirements
There are various penalties available to the ATO to impose on small businesses that fail to comply with STP reporting requirements, though they usually only apply such penalties to employers that are repeatedly late with their STP reports.
For small businesses, the penalty is $222 for every 28 days that the report is overdue. The penalties are stiffer for larger businesses, with medium sized businesses fined up to $2,220, large businesses fined up to $5,550, and significant global corporations up to $555,000.
Further penalties apply for knowingly making a false or misleading statement in an STP report.
Full details on the new STP reporting obligations for closely held employees can be found on the ATO’s website.
Disclaimer: This document contains general information and is also not intended to constitute legal or taxation advice. If you need legal or taxation advice, we recommend you speak to a qualified adviser.

Author: Alex Bundock
Alex is a Digital Marketing Manager at Breathe. He loves data and search and also enjoys writing about ways that Australian small businesses can help their staff.