Why now’s the time to transition to STP Part 2 in Xero

By now, you’ll be conversant in Single Contact Payroll Part 2. This can see your small business construct on its present STP reporting to share extra data with the ATO and extra authorities companies everytime you course of a pay run. With Xero’s deferral quickly coming to an finish, necessary Part 2 reporting is ready to begin from 31 March 2023. Which means that all Xero Payroll customers should transition to the Part 2 reporting normal. 

With the deadline quick approaching, time is of the essence – which is why we strongly advocate you make your transition at present. The excellent news is, you’re now in a position to transition all payroll knowledge and opt-in to STP Part 2 with just some steps. In actual fact, from late January, we are going to begin step by step enabling clients who’ve accomplished the transition to file their pay runs utilizing STP 2 (see under for extra particulars).

Unsure the place to begin? Don’t fear – we’ve answered your prime questions under. What’s extra, your advisor is all the time there for help, so you’ll want to attain out in case you want additional steering.

First issues first, what occurs if I don’t transition in time?

To satisfy your reporting obligations, in case you don’t transition by the March 31 deadline, your means to file STP could also be affected till you have got accomplished your STP 2 setup. In the event you’re not sure about your transition standing or what actions it’s worthwhile to take, communicate to your advisor. Failure to adjust to these transition necessities might lead to scrutiny from the ATO and potential penalties.

However can’t I simply transition subsequent month?

STP is usually a technical course of – and the bigger and extra advanced your small business is, the bigger and extra advanced the duty forward shall be. All of which is much more of a purpose to get forward now.

I’m seeing some warnings in Xero Payroll – what are these about?

In cases the place your present payroll knowledge doesn’t meet the brand new Part 2 reporting necessities, you’ll be alerted by warning banners inside pay runs or worker payslips. We encourage all clients to take early motion on addressing these warnings by updating your knowledge and opting-in to STP Part 2 as early as attainable. 

Why is Xero making a lot noise about this?

With the deadline quickly approaching, our knowledge suggests many employers are leaving issues till the final minute and that would put them in danger from further scrutiny from the ATO. We’ve been rising our communications as a result of our precedence is to make sure that all of our clients make the transition forward of time. 

How do I full every step of my transition to STP Part 2 in Xero?

To start out your transition at present, head on over to the STP Part 2 Portal in Xero Payroll to progress via every of the next steps: 

The first step

The primary a part of this course of is transitioning your present worker profiles to be STP Part 2 compliant. This implies offering new particulars, like whether or not they’re an worker or contractor. The first step additionally contains offering further data when onboarding new staff to Xero Payroll. Extra data could be discovered right here.

Step two

You’ll must determine and replace sure pay objects with the brand new earnings classes outlined by the ATO for STP Part 2 reporting. It’s because gross quantities for every earnings kind will now must be reported as a separate itemised quantity, like additional time or allowances. Head to Xero Central for extra particulars, together with a breakdown of the completely different earnings classes.

Step three

This step will break down paid depart into further subcategories. We’ll help you with a guided expertise in payroll so you’ll be able to simply replace present paid depart varieties to fulfill the brand new ATO reporting necessities. You may additionally discover that a few of your depart pay objects have already got the proper reporting class assigned. Go to Xero Central to study extra about this stage.  


Don’t overlook to mark every step as full within the STP Part 2 Portal earlier than transferring ahead. This ensures your payroll knowledge is correct and will assist scale back submitting errors later down the road.

Step 4: Switching to Part 2 reporting

As soon as your payroll knowledge is up to date and also you’ve marked every step as full within the STP2 Portal, you’ll have the ability to opt-in to Part 2 reporting. In partnership with the ATO, we’re rolling-out this functionality fastidiously to clients throughout late Jan to late Feb. Payroll admins shall be notified in Xero when it’s time to change.

When ought to I get began?

Now could be the time to transition so that you simply meet your reporting necessities. The earlier you’ll be able to tick this off your to-do checklist, the extra ready you’ll be.

Keep in mind, all using Australian companies should change into STP Part 2 compliant. So in case you’re working together with your advisor to make the transition, bear in mind they’re doubtless serving to many others do the identical. Keep affected person as they work via the method, and within the meantime, take a look at our Useful resource Hub or Xero Central for extra data.  

The place can I discover extra data on STP Part 2?

That will help you navigate the transition to STP Part 2 in Xero, we’ve gone forward and created a complete guide. This has what it’s worthwhile to know (and do) to make the transfer, from step-by-step directions to detailed explainers on depart, earnings and reporting classes. 

On the lookout for extra data? Head to Xero Central or seek advice from the ATO’s employer reporting guidelines. And don’t overlook to achieve out to your advisor for added help.