Valid Tax Invoice
Issuing incorrect invoices can cause all sorts of problems for small business owners including the most obvious – incorrect GST claims. Many owners are also oblivious to the serious cash flow issues it can cause while your customers sit at the other end trying to work out if you’re registered for GST, and worse still, hold up your payment while they demand a correct invoice be reissued.
The good news is, that issuing correct invoices is really easy.
1. If your business is registered for GST a valid tax invoice should include the following:
- enough information to show that the document is intended as a tax invoice, such as the words ‘Tax Invoice’ at the top
- the sellers identity and ABN
- a brief description of what is sold, including the quantity and the price of what is sold
- the extent to which each sale is a taxable sale – this can be shown separately or, if the GST to be paid is exactly one-eleventh of the total price, as a statement such as ‘total price includes GST’
- the date the document is issued
- the amount of GST payable for each sale
- if the total price of the sale is at least $1,000 the purchasers identity or ABN must also be able to be clearly identified
2. If your business is NOT registered for GST a valid invoice should include the following:
- the business name of the seller at the top
- the ABN of the seller at the top, near the sellers name
- the date of issue of the invoice
- an invoice number
- the statement ‘No GST has been charged’ should be included at the bottom
- the invoice cannot include words that indicate that the price of what is supplied is inclusive of GST. Note that it is not necessarily wrong to leave the words ‘Tax Invoice’ on the top of your invoice if you are not registered for GST, as long as your invoice clearly shows that the price of the supply does not include GST. Alternatively the seller could cross out the words ‘Tax Invoice’ or the word ‘Tax’. To minimise any confusion I would be inclined to leave the words ‘Tax Invoice’ off the invoice all together and just use the word ‘Invoice’. The clearer you can make your invoice, the less chance it will be held up when it gets to the purchaser
Other interesting facts about invoices:
1. Tax invoices that are missing information
If you receive an invoice from a seller that is missing certain information and is not a valid tax invoice, you may still be able to treat that document as a tax invoice if the missing information can be obtained from other documents issued by the seller. Other documents can include a seller’s product list, a business card, an email from the seller, or an earlier tax invoice.
At the end of the day, it is still up to the purchaser if they are willing to treat an incorrect document as a tax invoice regardless of what other information they have available to them. The purchaser may instead request that the seller reissue another document that complies with the requirements of a proper tax invoice. When asked, the seller is required to reissue the invoice within 28 days or penalties may apply.
2. You don’t always need to issue a tax invoice
You don’t need a tax invoice to claim GST credits for purchases costing $82.50 or less (including GST)
A final word
For further advice regarding invoicing I recommend this handout by the Australian Taxation Office – How to set out tax invoices and invoices (NAT 11675). I really love this handout. It is only 4 pages long and it sets it out in very simple terms the difference between an invoice layout for someone that is registered for GST, and an invoice layout for someone that is not. If you follow this handout you should never get it wrong.
Refer also to ATO Goods and Services Tax Ruling GSTR 2013/1. This ruling goes right into the finer nitty gritty details of invoicing requirements.
Did you like this article? Why not download our free book!
10 Tax Tips and Strategies for Running a Business and working at the same time
This tax book includes information on:
- contributing to super
- Motor Vehicle Travel
- Putting money aside to pay taxes
- Splitting home office expenses
- are you a hobby or a business?
- asset protection
- Income Protection
- Which software should you use?
This information, facts, insights and ideas (“Content”) are for general informational purposes only and nothing contained in it is or is intended to be, construed as advice. It does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon or treated as a substitute for specific or professional advice. You should, before you act or use any of this Content, consider the appropriateness of this information having regard to your own personal objectives, financial situation and needs. It should not be your only source of information but should be treated as a guide only. You should obtain your own independent professional advice before making any decision based on this information. In no event will we be liable for any loss or damage including and without limitation, indirect or consequential loss or damage, or any loss or damage howsoever arising from, out of, or in connection with the use of this Content.