By now, you’ll be familiar with Single Touch Payroll Phase 2. This will see your business build on its existing STP reporting to share more information with the ATO and additional government agencies whenever you process a pay run. With Xero’s deferral soon coming to an end, mandatory Phase 2 reporting is set to commence from 31 March 2023. This means that all Xero Payroll users must transition to the Phase 2 reporting standard.

DO YOU NEED HELP?  iCompass can manage your transition into Single Touch Payroll Phase 2, please do reach out, this process can be outsourced to iCompass to ease the pressure of these forthcoming updates. To discuss the specifics, please contact iCompass on 1300 554 948.

How do I complete each step of my transition to STP Phase 2 in Xero?

To start your transition today, head on over to the STP Phase 2 Portal in Xero Payroll to progress through each of the following steps:

Step one

The first part of this process is transitioning your existing employee profiles to be STP Phase 2 compliant. This means providing new details, like whether they’re an employee or contractor. Step one also includes providing additional information when onboarding new employees to Xero Payroll. More information can be found here.


Step two

You’ll need to identify and update certain pay items with the new earnings categories defined by the ATO for STP Phase 2 reporting. This is because gross amounts for each income type will now need to be reported as a separate itemised amount, like overtime or allowances. Head to Xero Central for more details, including a breakdown of the different earnings categories.

Step three

This step will break down paid leave into additional subcategories. We’ll support you with a guided experience in payroll so you can easily update existing paid leave types to meet the new ATO reporting requirements. You may also find that some of your leave pay items already have the correct reporting category assigned. Visit Xero Central to learn more about this stage.

Don’t forget to mark each step as complete in the STP Phase 2 Portal before moving forward.
This ensures your payroll data is accurate and could help reduce filing errors later down the line.

Step four: Switching to Phase 2 reporting

Once your payroll data is updated and you’ve marked each step as complete in the STP2 Portal, you’ll be able to opt-in to Phase 2 reporting. In partnership with the ATO, we’re rolling-out this capability carefully to customers across late Jan to late Feb. Payroll admins will be notified in Xero when it’s time to switch.

Where can I find more information on STP Phase 2?

To help you navigate the transition to STP Phase 2 in Xero, we’ve gone ahead and created a comprehensive guide. This has what you need to know (and do) to make the move, from step-by-step instructions to detailed explainers on leave, earnings and reporting categories.

Looking for more information? Head to Xero Central or refer to the ATO’s employer reporting guidelines. And don’t forget to reach out to your advisor for additional support.

Get in Touch

We have already assisted larger employers meet their STP obligations, and we can help you through this process as well.  If you need further support, please contact our office on 1300 554 948 to discuss appointment options and costs to ensure you are operational before 31st March 2023.

Get in Touch

To discuss your specific requirements please contact iCompass on 1300 554 948, get in touch using the form below – we’ll be delighted to help!

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