This page is a 5 minute summary of the Xero blog here. All business employers will soon be required to transition to STP PHASE 2 as part of the STP expansion.
Xero has been granted a deferral on the start date of the STP Phase 2 for our payroll software, and applies to all new and existing customers.
This means that all customers reporting STP using Xero Payroll have until 31 December 2022 to report their first STP Phase 2 pay run, instead of the 1 January 2022 ATO deadline.
This gives our Xero Payroll customers more time to ensure that payroll records are STP Phase 2 compliant.
The changes are being rolled out in stages to give you more time to adjust and get familiar with STP Phase 2. Here’s when you can expect to see them go live and what will be involved:
With stage one, the way you add new employees into Xero will be a little different. To be STP Phase 2 compliant, every new employee set up in payroll will need to have more detail on the components that make up their pay. These include:
Employment type – whether the individual is an employee or contractor.
Income type – elements of how the individual is paid. These include:
Employment basis – whether the individual is full-time, part-time or casual.
Tax scale – you will need to nominate the appropriate PAYG tax scale category that determines how much tax should be withheld for an employee. These tax scales include:
Good question. Closely held payees (otherwise known as a closely held employees) are individuals directly related to the entity from which they receive payments. For example, this would include relatives in a family business or beneficiaries of a trust fund.
With STP Phase 2, you’ll have to indicate whether an employee is closely held or one of the other income types. This means that if you’ve just hired your child or other relative, like a nephew, for a part-time job, you’ll have to select them as closely held when setting them up in Xero once stage one kicks in.
STP Phase 2 is important and we want to get it right. Which is why we’re starting with a limited release for stage one and allowing time to test and refine the payroll experience. This means a limited number of Xero customers will be able to sign up and use the new STP Phase 2 employee setup process before we roll it out more broadly. Why? All so that we can make the entire experience better for everyone involved.
This is an opt-in process – meaning you have to sign up to access it. Head to the employee section of our STP Phase 2 Information hub and follow the instructions and it will let you know if you’re eligible.
You can take a look at the Xero guide to STP Phase 2 and this handy checklist.
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