How to comply with ATO tax invoice requirements

Whether you're a sole trader, small company owner or multinational, the Australian Taxation Office (ATO) requires you to feature specific information on your tax invoices for sales of goods or services. In this article we'll tell you what's mandatory, and what else you can add to your invoices to help speed up payments.

What we'll cover

• Goods and services tax (GST)
• The need for a tax invoice
• Tax invoice must haves
• How to express GST
• Optimising your invoices for fast payments
• Payment methods
• Free tax invoice templates.

 

Do I have to register for goods and services tax (GST)?

If your business has a GST turnover of $75,000 or more, you must register for GST. What's a GST turnover? Your GST turnover is your total business income – not your profit – minus any GST included in sales to your customers.

 

Exceptions to the above are non-profit organisations (their GST turnover threshold is $150,000).

Your GST turnover is not related to the financial year. You reach the GST threshold as soon as your turnover for the current and previous 11 months reaches $75,000, or it is projected to do so. The finer details – along with ways to register for GST – are available on the Australian Taxation Office (ATO) website.

 

In general terms, you charge 10% GST on the goods and/or services you sell in Australia, unless they are GST-free (such as food, medicine and medical services) or input taxed. At the same time you can claim a credit for any GST included in the price of goods and services you buy for your business – which is one reason why some business owners choose to register for GST even though they are beneath the turnover threshold. There are some things you are not able to claim a credit for, but the best place to find them is the ATO Website

Do I have to issue tax invoices?

If you or your business is registered for GST, you must provide tax invoices. Any GST-registered customer of yours wanting to claim a credit can only do so if you provide them with a formal tax invoice. 

 

It's easy to think of invoicing as just time-consuming paperwork. But it's worth remembering that well-structured invoices help you monitor, manage and protect the cash flow of your business – and they are an important element of record keeping and helping you meet your tax obligations.

 

Incidentally, you may have heard about recipient created tax invoices, where the buyer writes the invoice themselves. We don't cover that specialist topic here, but you can read about businesses that are eligible to issue them on the ATO website.

What needs to be on an Australian tax invoice?

A valid tax invoice issued by a business in Australia needs to feature the following information:

 

• The words ‘Tax invoice' (or similar)
• Your identity as a ‘seller' (contact details are optional but advisable)
• The quantity and description of the goods or services provided
• Your Australian business number (ABN)
• The date the invoice was issued
• The GST amount(s) (featured as described below)
• For invoices over $1,000, the extent to which each sale on the invoice is a taxable sale, and therefore includes GST.

 

Later in this article we'll give you some tips on how other elements added to your invoices may help your business get paid faster.

Where should the GST amount appear on my invoices?

Broadly speaking, there are two ways you can express GST in your invoices. But how you feature it may depend on the total amount of the invoice:

1. Feature the GST alongside each line item:

 

This allows you to feature a mix of GST and GST-free items – and is the only acceptable format for total amounts payable of more than $1,000.

2. Add the GST as a total at the end (only allowed for invoices of less than $1,000):

 

You can only use this second method if the GST is exactly one-eleventh of the total price – which must be less than $1,000. Your invoice will need to include words such as ‘Total price includes GST’.

What can I add to my tax invoices to help my business get paid faster?

A few simple additions to your tax invoices may help speed up payments.

 

• Use the most appropriate customer name on each invoice to streamline payment processing.
• Feature a phone number on your invoices to give the recipient the opportunity to contact you immediately if they have a query that may be delaying payment.
• Add a clear 'Please pay by' or 'Payment is due by' date. You could also consider providing a modest discount for prompt payment.
• Offer a choice of payment methods on your invoices so that customers can pay you the way they want to.

What payment methods could I feature?

Customers like to pay in different ways, so the more options you offer the better. Payment methods you could feature on your invoices include:

 

• Direct bank to bank transfer (listing your bank account BSB and account number on your invoices)
• Direct bank to bank transfer using  PayID^® (featuring just the ABN or mobile number you've registered for the service)
• BPAY® if the scale of your business merits applying for an account
• Credit card over the phone using a virtual terminal
• Paying you in person via the EFTPOS Air mobile app or an EFTPOS machine, or with cash
• Paying by post with a cheque
• An international payment method (noting that to accept international currencies you may need a foreign currency account).

Where can I get a free GST tax invoice template for a business in Australia?

A simple online search will reveal many sources of GST tax invoice templates, some of which can be downloaded for free. You’ll come across common formats such as Word and Excel, while others may be embedded in small business accounting software such as MYOB and Xero.

 

Just make sure that the template you choose features fields for all the mandatory ATO tax invoice requirements listed above, plus the capacity to add extra elements that may speed up payments.