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

By now, you’ll be accustomed to Single Contact Payroll Section 2. It will see your online business construct on its current 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 Section 2 reporting is about to begin from 31 March 2023. Which means all Xero Payroll customers should transition to the Section 2 reporting normal. 

With the deadline quick approaching, time is of the essence – which is why we strongly suggest you make your transition at the moment. The excellent news is, you’re now capable of transition all payroll knowledge and opt-in to STP Section 2 with only a few steps. In truth, from late January, we are going to begin steadily enabling prospects who’ve accomplished the transition to file their pay runs utilizing STP 2 (see beneath for extra particulars).

Undecided the place to begin? Don’t fear – we’ve answered your prime questions beneath. What’s extra, your advisor is all the time there for assist, so remember to attain out for those who want additional steering.

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

To satisfy your reporting obligations, for those who don’t transition by the March 31 deadline, your potential to file STP could also be affected till you will have accomplished your STP 2 setup. If you happen to’re not sure about your transition standing or what actions you might want to take, converse to your advisor. Failure to adjust to these transition necessities might end in 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 online business is, the bigger and extra advanced the duty forward shall be. All of which is much more of a cause 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 Section 2 reporting necessities, you’ll be alerted by warning banners inside pay runs or worker payslips. We encourage all prospects to take early motion on addressing these warnings by updating your knowledge and opting-in to STP Section 2 as early as doable. 

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 might put them in danger from extra scrutiny from the ATO. We’ve been rising our communications as a result of our precedence is to make sure that all of our prospects make the transition forward of time. 

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

To begin your transition at the moment, head on over to the STP Section 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 current worker profiles to be STP Section 2 compliant. This implies offering new particulars, like whether or not they’re an worker or contractor. The first step additionally consists of offering extra data when onboarding new workers to Xero Payroll. Extra data will be discovered right here.

Step two

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

Step three

This step will break down paid go away into extra subcategories. We’ll assist you with a guided expertise in payroll so you’ll be able to simply replace current paid go away varieties to fulfill the brand new ATO reporting necessities. You might also discover that a few of your go away pay gadgets have already got the right reporting class assigned. Go to Xero Central to study extra about this stage.  


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

Step 4: Switching to Section 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 Section 2 reporting. In partnership with the ATO, we’re rolling-out this functionality rigorously to prospects throughout late Jan and early Feb. Payroll admins shall be notified in Xero when it’s time to change.

When ought to I get began?

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

Bear in mind, all using Australian companies should turn out to be STP Section 2 compliant. So for those who’re working together with your advisor to make the transition, take note they’re possible serving to many others do the identical. Keep affected person as they work via the method, and within the meantime, try our Useful resource Hub or Xero Central for extra data.  

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

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

Searching for extra data? Head to Xero Central or consult with the ATO’s employer reporting guidelines. And don’t neglect to succeed in out to your advisor for added assist.