Home Small Business Why now could be the time to transition to STP Section 2 in Xero

Why now could be the time to transition to STP Section 2 in Xero

Why now could be 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 enterprise 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, obligatory Section 2 reporting is about to start from 31 March 2023. Which means that all Xero Payroll customers should transition to the Section 2 reporting commonplace. 

With the deadline quick approaching, time is of the essence – which is why we strongly suggest you make your transition immediately. 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 actual fact, from late January, we’ll begin step by step enabling prospects who’ve accomplished the transition to file their pay runs utilizing STP 2 (see beneath for extra particulars).

Unsure the place to begin? Don’t fear – we’ve answered your prime questions beneath. What’s extra, your advisor is at all times there for help, so make sure to attain out when you want additional steering.

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

To satisfy your reporting obligations, when you don’t transition by the March 31 deadline, your capability to file STP could also be affected till you’ve gotten accomplished your STP 2 setup. Should you’re not sure about your transition standing or what actions it’s essential take, converse to your advisor. Failure to adjust to these transition necessities could 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 enterprise is, the bigger and extra advanced the duty forward will likely 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 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 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 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 start out your transition immediately, head on over to the STP Section 2 Portal in Xero Payroll to progress via every of the next steps: 

The 1st step

The primary a part of this course of is transitioning your present worker profiles to be STP Section 2 compliant. This implies offering new particulars, like whether or not they’re an worker or contractor. The 1st step additionally consists of offering extra data when onboarding new workers to Xero Payroll. Extra data might be discovered right here.

Step two

You’ll must establish and replace sure pay gadgets with the brand new earnings classes outlined by the ATO for STP Section 2 reporting. It is 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 completely different earnings classes.

Step three

This step will break down paid go away into extra subcategories. We’ll help you with a guided expertise in payroll so you possibly can simply replace present paid go away sorts to satisfy the brand new ATO reporting necessities. You might also discover that a few of your go away pay gadgets have already got the proper reporting class assigned. Go to Xero Central to be taught 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 scale 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 be capable of 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 will likely be notified in Xero when it’s time to modify.

When ought to I get began?

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

Bear in mind, all using Australian companies should develop into STP Section 2 compliant. So when you’re working along with your advisor to make the transition, be mindful 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 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 it’s essential 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 check with the ATO’s employer reporting tips. And don’t neglect to achieve out to your advisor for added help. 



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