Types of invoices
What is an invoice?
An invoice is a record of purchase that allows your customer to pay you for goods or services you’ve provided them.
Invoices give details of the purchase, including the type of product or service provided, the quantity and the price agreed to.
Proper invoicing helps you to protect your business’ cash flow, maintain good records and meet your tax obligations.
Invoice or tax invoice?
If you run a business that isn’t registered for Goods & Services Tax (GST), your invoices won’t include a tax component. This is considered a regular invoice.
If you’re registered for GST, your invoice must be a tax invoice. Tax invoices are different as they include the GST amount for each item along with some extra details.
You need to provide a tax invoice if any of these apply to the sale:
- the purchase is taxable
- the purchase is more than $82.50 (including GST)
- your customer asks for one.
If your customer asks for a tax invoice and you’re not registered for GST, your invoice should show that no GST was charged on the purchase. You can do this by including the statement ‘Price does not include GST’ or showing the GST component as nil or zero.
Recipient created tax invoice
In special cases, the buyer can provide you with the tax invoice. These are known as recipient created tax invoices (RCTIs).
An example where an RCTI may be used is in the sale of agricultural products where the buyer determines the value of the product. Sugar cane mills, for example, test for the sugar content in crushed sugar cane to find its true value. Once the value of the sugar cane is known, the mill can provide the seller with a tax invoice.
Learn more about RCTIs, including when and how you can use them.
What to do before you start invoicing
Before you start invoicing customers, consider having a procedure for setting up customer accounts. Without a process, you might find your invoicing system becoming inefficient and complicated.
Here are some tips to help you prepare for invoicing:
- consider using bookkeeping or customer relationship management software to help you manage invoicing and recording customer sales.
- set up a business bank account beforehand.
- get as much information as possible from your customer before sending the invoice. This includes their contact details such as name, address, phone and email, and ABN (needed for tax invoices).
- choose your accepted methods of payment and the payment terms (for example, payment required within 30 days of receiving the invoice).
- once a customer has received their goods or services, contact them to ensure there are no issues or defects. This will help you avoid disputes and delays in receiving payment, and is also considered a good customer service technique.
What to do...
- Find out when you need a tax invoice for claiming GST credits on the ATO website.
- Learn more about registering for GST.
- Watch the ATO’s video on managing invoices, payments and record keeping.
- Check out our page on setting up a basic bookkeeping system.
- Read more about customers and how to provide good customer service.