How to Set Up Xero

Before you start: what you need on hand

• ABN/ACN and business structure (sole trader, company, trust or partnership).
• GST registration status, BAS cycle (monthly/quarterly) and tax basis (cash or accrual).
• Bank account and card details for feeds; payment services (e.g. Stripe, GoCardless) if you want online payments.
• Payroll needs: employees, pay frequencies, awards/classifications, super funds, leave policies and key dates for STP 2.
• Conversion date and opening balances if you’re migrating from another system.

How to set up Xero step by step

1. Create your organisation and choose Australia as the country. Set your financial year (typically 1 July–30 June), time zone and business details.
2. Choose your Xero plan based on transaction volume and payroll needs. If you’re paying staff, ensure your plan supports Payroll with STP 2.
3. Set GST and BAS: turn on GST, choose reporting frequency and tax basis, and set default tax rates (GST on Income, GST Free, Input Taxed, GST on Expenses). Check BAS settings and contact a BAS agent if you’re unsure.
4. Build your chart of accounts: use Xero’s AU template or import your own. Map each account to the correct tax rate, and set up tracking categories for locations, projects or cost centres.
5. Connect bank accounts and card feeds for all trading and payment accounts. Choose the correct start date and avoid duplicating imported statements.
6. Configure invoicing and payments: set branding, payment terms and reminders. Connect Stripe/GoCardless for card and direct debit. Enable eInvoicing (Peppol) if you sell to government or larger businesses.
7. Add contacts and items: import customers, suppliers and product/service items with default tax rates.
8. Set up payroll (STP Phase 2): create pay calendars, earnings/deductions/super pay items, and leave rules. Onboard employees (TFN, tax scale, super choice). Connect STP to the ATO and run a test pay event. If needed, see our Payroll services.
9. Enter opening balances and conversion date: load outstanding invoices/bills, bank balances, payroll opening balances (including leave), and check retained earnings.
10. Test and reconcile: raise a sample invoice and bill, match bank transactions, and verify GST/BAS reports. Lock past periods once verified.

Australian settings that matter for BAS and payroll

• GST codes: apply GST on Income/Expenses 10% to taxable supplies and purchases; use GST Free for exports and certain supplies; Input Taxed for financial supplies and residential rent. Consistent coding avoids BAS errors.
• Tax basis: cash vs accrual changes when GST is reported. Set it to match your ATO registration.
• Bank rules: create rules with the correct GST codes to speed up reconciliations and keep BAS, PAYG and super accurate.
• Payroll STP 2: map pay items to the correct STP categories (e.g. ordinary time earnings, allowances, deductions, paid leave). Connect STP to the ATO and lodge each pay run.
• Superannuation: set super guarantee rates according to current ATO guidance and configure your super clearing (Xero Auto Super or your fund’s clearing house).

If you prefer to have an expert configure these, compare Bookkeeping services, BAS agent services and Tax accountants to match your scope.

Migrating to Xero from MYOB or QuickBooks

Plan your conversion carefully:

• Pick a conversion date (often month-end) and reconcile your old system to that date.
• Export and import your chart of accounts, contacts, items and open AR/AP into Xero.
• Enter opening balances, including bank, payroll and inventory as needed.
• Connect bank feeds from the conversion date and reconcile forward.
• For complex histories or inventory, consider Xero’s conversion partners or a small business accountant.

Common Xero setup mistakes to avoid

• Using the wrong GST basis or codes and lodging an incorrect BAS.
• Connecting bank feeds with the wrong start date, creating duplicates or gaps.
• Not mapping payroll pay items to STP 2 categories before the first pay run.
• Posting superannuation directly to expense without using payroll liabilities.
• Leaving default invoice branding, terms or payment services unconfigured, slowing cash collection.

What to do next

If your setup is straightforward, work through the steps above and run a small pilot month. If you have payroll, inventory, multiple entities, or deadlines, getting professional help will usually cost less than fixing errors later.

Use these pathways to move from information to action:

• Bookkeeping services for day-to-day Xero setup and reconciliations.
• BAS agent services for GST/BAS configuration and lodgements.
• Payroll services for STP 2 setup and employee onboarding.
• New business accountant if you’re starting up and need structure plus Xero from scratch.
• Accounting services hub for broader tax and advisory support.