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What you’ll want to know concerning the first stage of STP Section 2 in Xero


This 12 months, the way in which you handle Single Contact Payroll (STP) will begin to look somewhat completely different as we transition to STP Section 2. This can broaden how employers report particulars about their workers and their pay to the ATO. With a compliance deadline for Xero prospects set for the tip of this 12 months, we’ve been busy working to prepare for the transition in Xero Payroll. 

The adjustments can be rolled out in three phases all year long, with the primary stage beginning later this month through an opt-in restricted launch. So what’s coming and how are you going to prepare? Let’s take a deeper look. 

Remind me, how are the STP Section 2 adjustments being put in place this 12 months? 

The adjustments are being rolled out in phases to present you extra time to regulate and get accustomed to STP Section 2. Right here’s when you’ll be able to count on to see them go stay and what can be concerned:

  • Stage one: The primary stage will begin turning into accessible inside Xero from later this month (April) onwards through a restricted launch earlier than being rolled out over the next months. This can embody updates to the way in which new worker information are arrange in payroll.
  • Stage two: The second stage will start rolling out inside Xero within the new monetary 12 months. This can lengthen the arrange course of to allow the transition of current worker payroll information to STP Section 2 compliance.
  • Stage three: The ultimate stage can be accessible within the second half of this 12 months. It can see the brand new pay gadgets and depart from STP Section 2 finalised inside Xero, with product help to overview current pay gadgets and depart which will must be modified to these stipulated by STP Section 2.

Will this variation how I report back to the ATO proper now?

Not but – it’s essential to notice that each one Xero payroll prospects will proceed to report STP Section 1 in the interim. The rollout of STP Section 2 pay gadgets and updates to the worker setup course of in Xero Payroll won’t have an effect on reporting or any YTD values despatched to the ATO. 

Xero Payroll will proceed to report pay as gross till prospects have accomplished the complete transition later this 12 months. There are not any impacts or adjustments to the STP finalisation course of in July 2022. In the meantime, many of those new pay gadgets are already accessible in Xero Payroll, so you will get accustomed to them earlier than the compliance date.

Don’t fear – we’ll be offering help by every of the transition phases (each inside your Xero account and thru academic sources). When you run a small enterprise, your advisor will be capable to present help presently. 

What adjustments are coming as a part of stage one? And what does it imply for the way I add new staff?

With stage one, the way in which you add new staff into Xero can be somewhat completely different. To be STP Section 2 compliant, each new worker arrange in payroll might want to have extra element on the elements that make up their pay. These embody:

Employment sort – whether or not the person is an worker or contractor.

Earnings sort – components of how the person is paid. These embody:

  • Wage and wages (this tends to be most staff, relying on your online business)
  • Intently held payee
  • Working vacation maker
  • Non-employee (contractor)
  • Labour rent (contractor from a labour rent company)

Employment foundation – whether or not the person is full-time, part-time or informal.

Tax scale – you will have to appoint the suitable PAYG tax scale class that determines how a lot tax must be withheld for an worker. These tax scales embody:

  • Common
  • Actors, selection artists and different entertainers*
  • Horticulturalists and shearers*
  • Seniors and pensioners
  • Working Vacation Maker

*Withholding tax for seniors and pensioners, actors, selection artists and different entertainers, in addition to horticulturalists and shearers will must be calculated manually (as is the present course of). Xero doesn’t at present help the distinctive withholding tax guidelines for these tax scales.

On this video, we present you the best way to add an worker with the brand new Single Contact Payroll Section 2 worker arrange: 

You talked about intently held payees – what are these once more?

Good query. Intently held payees (in any other case often called a intently held worker) are people immediately associated to the entity from which they obtain funds. For instance, this would come with family in a household enterprise or beneficiaries of a belief fund.

Final 12 months, STP tips have been up to date so that each one companies should embody intently held payees salaries or wages by STP – irrespective of how sometimes they’re included in a pay run.

With STP Section 2, you’ll have to point whether or not an worker is intently held or one of many different earnings sorts. Which means that in case you’ve simply employed your baby or different relative, like a nephew, for a part-time job, you’ll have to pick them as intently held when setting them up in Xero as soon as stage one kicks in.

What’s a restricted launch and the way do I choose in?

STP Section 2 is essential and we need to get it proper. Which is why we’re beginning with a restricted launch for stage one and permitting time to check and refine the payroll expertise. This implies a restricted variety of Xero prospects will be capable to join and use the brand new STP Section 2 worker setup course of earlier than we roll it out extra broadly. Why? All in order that we will make all the expertise higher for everybody concerned.

That is an opt-in course of – which means it’s a must to signal as much as entry it. Head to the worker part of our STP Section 2 Info hub and comply with the directions and it’ll let you understand in case you’re eligible.

How will I do know once I’ll be capable to use the STP Section 2 new worker arrange?

When you meet the standards, you’ll be able to register and your account will change over within the following weeks. For everybody else, we’ll begin to transfer you throughout over the following few months. This course of will occur progressively and also you’ll understand it’s time when the brand new fields can be found in your worker arrange course of.

Will there be a deadline for opting in?

No, you’ll be able to register at any time, up till the broader launch of stage one.

What if I’m not planning on including a brand new worker any time quickly although? 

No want to fret – in case you’re not including any new staff, you won’t even discover the change. It’s helpful to pay attention to this up to date course of, nevertheless, for if you do have somebody new becoming a member of the staff. 

I’m confused about including contractors into my payroll. What ought to I be doing?

There are just a few other ways to handle contractors in Xero. First, a fast refresher on what counts as a contractor. They run their very own enterprise and promote their time and talent as a service to others, in contrast to staff who work inside a enterprise.

Contractors – typically known as impartial contractors, sub-contractors or subbies – typically use their very own processes, instruments and strategies to finish the work. They normally negotiate their very own charges and dealing preparations, and may work for multiple consumer at a time.

Inside Xero, contractors will be arrange as a payee at your discretion. For instance, you may do that in the event that they submit timesheets or are entitled to be paid superannuation. In the event that they’re arrange as a payee in Xero Payroll, you’ll have to comply with the brand new STP Section 2 course of.

For extra info on how contractors are outlined, go to the Fairwork web site. When you’re after recommendation particular to your online business, please attain out to your advisor.

What STP Section 2 updates are already accessible in Xero?

Lots of the pay gadgets from STP Section 2 are already stay and able to go in Xero, like bonuses and commissions, new allowance sorts and a wide range of lump sum funds. When you don’t want to make use of these simply but, they’re accessible in case you’d wish to get a head begin in your STP Section 2 compliance.

For the complete particulars, go to the STP Section 2 Info Hub through the Single Contact Payroll part of your Xero account. We’ll proceed to share the standing of latest capabilities as they’re added.

The place can I discover extra info on STP Section 2?

We’ve obtained you coated. You’ll be able to check out the Xero information to STP Section 2 and this useful guidelines. You can even go to Xero Central, or seek advice from the ATO’s employer reporting tips.

Maintain an eye fixed out for extra updates from us – we’ll let you understand what’s altering at each step of the way in which. And, in fact, don’t hesitate to ask you probably have any questions – we’re all the time right here to assist.

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