New start

3 Feb


Posted at 11:40h

Under STP Phase 2, the Australian Government requires all employers to report additional information through STP on or before each payday. This information will include details such as an employee’s employment or income type and the reason for any cessation of employment.

Xero has been granted a deferral on the start date of STP Phase 2 reporting which applies to all new and existing customers. This means that all customers reporting STP using Xero Payroll have until 31 March 2023 to report their first STP Phase 2 pay run.

Xero’s transition to STP Phase 2 has been broken down into three stages that are available now in all Xero organisations:=
1. Update employees’ employment type, income type, and tax scale
2. Replace existing pay items that require a new STP2 reporting category
3. Assign a leave category to each paid leave item


Each employee record requires updating with the following information:

  • Employment type – whether the individual is an employee or contractor.
  • Income type – how the individual is paid, ie. salary and wages or closely held payee.
  • Employment basis – whether the individual is full-time, part-time, or casual.
  • Tax scale – the PAYG tax scale category that determines how much tax should be withheld for an employee.


Next each pay item needs to be updated one at a time to assign one of the following ATO reporting categories for STP Phase 2:

a. Ordinary time earnings
b. Allowances
c. Bonuses and commissions
d. Directors’ fees
e. Paid parental leave
f. Overtime
g. Lump sum W
h. Workers’ compensation


Finally, a leave category will need to be allocated to each of the active leave pay items in your organisation. The category determines how the payment is reported to the ATO through STP Phase 2.

In order to ensure a smooth transition, Curve can handle these updates to STP Phase 2 for you. If you would like us to manage the transition we would be happy to help. The fee for this service is $50 +GST per employee. If you would like assistance, please let us know by emailing [email protected]

We will send you a form to complete for your employees and employment information and then action the changes in your Xero subscription.

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