By now, most businesses should be well versed in using Single Touch Payroll (STP) phase one. The ATO initiative was designed to streamline the reporting of employee pay, tax withheld and super with the help of software providers like Xero and MYOB.

The ATO extended the reporting capabilities in what is termed STP2 or STP Phase 2. From 1 January 2022, businesses were required to report additional information via STP, eliminating existing reporting requirements in some instances. However, certain providers were granted deferrals on this.

Xero’s STP Phase 2 reporting deferral has been extended through 31 March 2023, meaning Xero Payroll customers will have until the New Year to activate STP Phase 2. However, Xero is now beginning to roll out some of the required changes so that people will be ready when the time comes.

The changes are being rolled out in three stages:

Stage one – Delivered in August 2022: The first part of this process is transitioning your existing employee profiles to be STP Phase 2 compliant. This means providing new details on existing staff, like whether they’re an employee or contractor. See video below.

Stage two – Delivered in September 2022: You’ll need to identify and update certain pay items with the new earnings categories defined by the ATO for STP Phase 2 reporting. See Video Below.

Stage three – TBA: This is the final step in the STP Phase 2 transition and will break paid leave down into additional subcategories. We’ll support you with a guided experience in payroll to more easily update existing paid leave types to meet the new reporting requirements.

Start planning for your transition now

While you’ll have the time to make all relevant changes, the best approach is to get started as soon as possible. This might require some planning to ensure you have all the information needed.