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

Since 1 June 2025, payroll and automated superannuation are included in every Xero business plan, so there is no separate add-on to buy before getting started.

1. Enable payroll in your organisation

Under Payroll Settings, you will step through your organisation details, pay calendar, and bank account used for pay runs.

2. Connect to the ATO for STP

Xero needs to be linked to the ATO through the Single Touch Payroll settings, which authorises Xero to report your pay run data directly.

3. Set your pay calendar

Choose weekly, fortnightly or monthly, matching how you actually pay your staff.

4. Check everything before your first real pay run

It is worth running a test pay before processing a real one, so any setup issues show up before real wages and super are involved.

Xero’s official YouTube channel covers payroll setup: watch the official Xero tutorial. Our registered BAS agents can review your payroll setup before you go live.