Before you set up STP, you need to set up your organisation with payroll.
In the Payroll menu, select Single Touch Payroll.
If you don’t want to opt in right now, close the message by clicking Not now.
Click Opt in to confirm.
Review your organisation details. If necessary, click Update Organisation details. Xero will redirect you to the Organisation details page. Otherwise, click Continue.
To connect your Xero account to the ATO, call the ATO on 1300 852 232.
Provide the ATO with the proof of ownership listed in Xero’s prompt, including your Australian Business Number (ABN) and Software ID (SSID).
Select the checkbox to confirm you've contacted the ATO to connect your Xero account.
Hope this helps