It’s time to transition to STP Phase 2 in Xero Payroll

Monday 20th February 2023

It’s time to transition to STP Phase 2 in Xero Payroll

Monday 20th February 2023
Written by Cassandra Sharp

The ATO’s Single Touch Payroll (STP) Phase 2 deadline was 31 December 2022. However, Xero received a deferral for clients. 

With just over a month until Xero’s reporting deferral comes to an end on 31 March 2023, it’s essential that you transition to STP Phase 2 and begin mandatory reporting ASAP if you’re a Xero Payroll user.  

STP can be a technical process. The larger and more complex your business is, the larger and more complex the task ahead—even more reason to take action now.

As a Xero Platinum Partner, we wanted to provide you with some guidance to ensure you meet the deadline.

What steps do you need to take?

If we do your payroll bookkeeping for you, you don’t need to do anything; we’re already working through STP Phase 2 actions on your behalf. 

If you do your own payroll bookkeeping, you need to head over to the STP Phase 2 Portal in Xero to follow steps one, two and three and complete your transition. Make sure you mark each stage complete as you go. 

If you miss the deadline, your ability to file STP may be affected until you’ve completed the set-up. Failure to comply with your reporting requirements may result in you facing ATO scrutiny and potential penalties. 

Why STP Phase 2? A recap

Single Touch Payroll (STP) Phase 2 is an extension of the STP reporting regime that was introduced by the Australian Taxation Office (ATO) in July 2018.

STP aims to provide real-time visibility of payroll information to the ATO and simplify the reporting process for you, the employer. 

STP Phase 2 expands the range of information you must report to the ATO through the STP system. Under Phase 2, you need to report additional information, including:

  •  A breakdown of gross amounts paid to employees
  • Allowances
  • Deductions
  • Some employee details

You also need to report more frequently, with the requirement to report on a pay-event basis rather than at the end of each financial year.

The aim of STP Phase 2 is to improve the accuracy and transparency of payroll reporting and make it easier for the ATO to identify and address compliance issues. 

STP Phase 2 also reduces the burden of reporting to multiple government agencies and means employees get the right payment at the right time.  

Additional STP Phase 2 resources

For further information and FAQs, head to the Xero STP blog 

Check out Xero’s Resource Hub

Register for and attend Xero’s live webinar on 7 March 

Learn more from the ATO about Single Touch Payroll 

If you need any further assistance with STP Phase 2, please contact your Maxim Advisor or reach out to our team