This is part of our Payroll and STP Phase 2 series (Chapter 5 of the Xero tutorial hub):

• Lesson 1: Setting Up Xero Payroll and Connecting to the ATO
• Lesson 2: Adding Employees to Xero with STP Phase 2 Details
• Lesson 3: Running Your First Pay Run in Xero
• Lesson 4: Superannuation and Auto Super in Xero
• Lesson 5: STP Phase 2 Pay Items and Leave Categories in Xero
• Lesson 6: End of Year STP Finalisation in Xero

Adding an employee correctly the first time saves a lot of correction work later, especially with the extra detail STP Phase 2 requires.

1. Enter their basic details

Name, address, date of birth, and bank account details for pay go in first.

2. Select the correct income type

STP Phase 2 requires an income type, such as regular employment, working holiday maker, or closely held payee, which affects how their pay is reported to the ATO.

3. Set their tax treatment

This replaces the old tax file number declaration categories with a more detailed code covering things like residency and any tax offsets claimed.

4. Set up super and leave entitlements

Add their nominated super fund and set up any leave categories that apply, like annual and personal leave.

Xero’s YouTube channel has STP Phase 2 employee setup guides: watch the official Xero tutorial. Our registered BAS agents can double check new employee setups for you.