This User Guide focuses on how to correctly transition employees and contractors into STP Phase 2 by assigning new employment details required by the ATO. 

One of the key goals of STP Phase 2 is streamlining the employee's onboarding process and expanding the range of employment information originally submitted through the Tax File Number Declarations. 

STP Phase 2 includes additional employment basis, introduces new employment concepts defined as Income Types and finally expands the employee Tax Treatment.

If you would like to read more about the changes introduced in STP Phase 2 to employment information, please refer to the STP 2 blog published on our website.

To transition your employee contacts into STP Phase 2, you will need to assign employment basis and Income types to each active employee.
Note: you should review your current list of Active Employees and terminate any employees who are no longer working for your Organisation.

Transition Employees to STP Phase 2

You can access your employee transition directly from the employee screen or from the STP Phase 2 Resource Centre

1. Go to Payroll > Employees
   
   è  The Employee screen opens
   
   
   
2. Under the Action required column, you will be prompted to update your employees' details for STP Phase 2
3. Click on Update next to the first employee
   
   è  The Employee Profile's Updated Employment Tab screen opens
   
   
   
4. Select the following details:
   • Employment Type > Select either Employee or Contractor
   • Income Type > Select the correct Income Type based on the employee's employment type
   • Tax Scale > Select the correct Tax Scale applicable to the Employee
     Note: Xero only supports the Regular Income Type, if you select a different tax scale you will be required to manually calculate the tax withholding in each pay run.
5. Click on [Save & continue] > [Back to employee]
6. Repeat the above steps for all employees
7. Once all your employees' information has been updated for STP Phase 2, the Action Column should be blank
   
   è  The Employee screen 
   
   
   
8. If you are using the STP Phase 2 Resource Centre to manage your transition to STP Phase 2, return to the Resource Centre and mark Step 1 as Complete. 
   
   è  The STP Phase 2 Resource Centre