A closely held employee is someone who's directly related to the business, company or trust that pays them, such as:
- family members of a family business
- directors or shareholders of a company
- beneficiaries of a trust.
The ATO refers to these as closely held payees, but as we'll explain below you'll set them up in MYOB Essentials as employees—so that's how we'll refer to them.
Setting up a closely held employee
Closely held employees can be set up in MYOB Essentials the same as any other employee. For all the details, see Adding an employee. You don't need to indicate anywhere that the employee is closely held.
You'll need to ensure PAYG Withholding and Superannuation Guarantee Contributions are calculated on the employee's gross wage and paid by the due dates.
MYOB Essentials with Payroll, Australia only
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The Superannuation Guarantee Contribution rate increases to 10% from the 1st July 2021.
Paying a closely held employee
Because you'll be reporting payroll information to the ATO once per month, you'll likely need to record interim payments to reflect the more regular payments you make to closely held employees.
Each business is different, so check with an accounting advisor about the best way track, record and reconcile these interim payments.
One suggestion would be:
- Create a payroll clearing account to keep track of interim payments made to closely held employees.
- Record interim payments as spend money transactions, allocated to the payroll clearing account. This needs to be the net wage amount. You can use your online banking software to deposit the money into the employee's account as you won't be able to create an ABA bank file for these payments.
Reporting pays through Single Touch Payroll (STP)
If you haven't already, you'll need to set up STP. You'll then be able to report your closely held employees' payroll information to the ATO each month.
To get started, go to the Payroll menu and choose Single Touch Payroll reporting.
For all the details, see Setting up Single Touch Payroll reporting.
Once you're set up, you can report your closely held employee's payroll information through STP.
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- Go to Payroll > Enter Pay.
- For How often choose Monthly.
- For the pay period dates, choose the full month.
- Select the employee(s) you're paying and click Start pay run.
- Enter the total gross amount paid to the employee for the month.
- Complete the pay as normal. Need a refresher?
- When prompted to send payroll information to the ATO, enter the name of the authorised sender and click Send.
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Speak to your accountant who may be able to advise an annual gross amount for the employee. You can then set the employee as a salaried employee and enter their annual gross amount in the $/yr field (Payroll > Employees > click the employee > Employee details tab).
At the end of the payroll year
Your accountant will work with you at the end of the payroll year to ensure your books are balanced. For example, you might need to allocate any remaining balance in the payroll clearing account which hasn't been processed through payroll.
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