Do your invoices pass the compliance test?
As a bookkeeper I’ve seen so many ‘home-made’ invoices during my business life.
By ‘home-made’, I mean those who aren’t using a bookkeeping system that produces the invoice for you, but those who create their own invoices using programs such as Excel or Word.
And don’t get me wrong, there’s nothing bad about doing them yourself, especially if you’re just starting out or haven’t found your ideal bookkeeping software.
What is bad, is when you don’t understand the requirements of the ATO and you’re sending out invoices that aren’t compliant and up to standard. Not having the right information can come back to smack you on the butt (and not in a nice way). Trust me, you don’t want to battle the ATO.
One of my first jobs when I sign on a new bookkeeping client is to check their current system. If they’ve been using a proper bookkeeping program, they are generally alright. But if they’ve been making their own invoices, many have issues.
For example, do you know the difference between an ‘invoice’ and a ‘tax invoice’? If you’re registered for GST, you must have the words ‘Tax Invoice’ clearly stated on the document. If you’re not registered for GST, you simply say ‘Invoice’. Get this wrong and you’re already breaking ATO regulations.
What the ATO want you to know about invoicing
The life of a bookkeeper means keeping up to date with all the ATO requirements and ensuring my clients are remaining compliant. So, here’s a bit of information from the ATO.
You need to provide a ‘tax invoice’ if any of the following relate to the sale: the purchase if taxable; the purchase is more than $82.50 (inc. GST); or your customer asks for one.
If your customer asks you for a tax invoice and you’re not registered for GST, you need to write, ‘price doesn’t include GST’, or put the GST component as $0. Remember too that your non-GST registered invoice should only say ‘Invoice’.
8 items that MUST be included on your tax invoice
I’ve come to realise that not everyone is like me (shocking hey!). And not only that, but it seems that bookkeepers and accountants are really the only people who give two hoots about tax.
But when your get that letter from the ATO that you’ve made errors…eeek!
So as a quick reference guide, here’s what you must include on your tax invoice (when you’re registered for GST). Please note, the first 7 refer to all sales under $1,000 and number 8 must also be included for sales over $1,000.
- Clearly called ‘Tax Invoice’
- Your identity
- Your ABN
- The date of issue
- Short description of the item/services sold, quantity and price charged
- The GST amount shown separately or if included in the cost, you’ll write, ‘Total price includes GST’
- The extent to which each sale on the invoice is taxable (i.e. what sales include GST)
- For sales over $1,000, you must include the identity or ABN of the buyer
In my bookkeeping opinion, here’s what good invoices have
Here’s my suggestions to include on all invoices to cover your bases:
Business info: business name (and/or trading name), postal address, email address, website address, phone number, ABN or ACN.
Customer info: contact details, name of contact or accounts person, a purchase order number or contract number (if you were given one).
Invoice date: The date you create and send the invoice so it’s clear when payment is due if you use terms such as ‘payable within 7 days of issue’.
Invoice number: Vital for your own record keeping.
Amount due and description of goods: List each one separately (one per line) so it’s clear what you’re selling.
GST: The amount of GST you’re charging. Remember to leave this as $0 on an ‘invoice’ with a note that ‘GST is not charged’ or ‘Not registered for GST so not charged’.
Payment details: A bit of a no-brainer if you’re wanting to get paid! List your payment terms, the payment options and your direct banking details (remember to include the BSB, account number, account name and a reference number they can use so you can see when they pay).
For future invoicing information, save these links
These links are my handy go-to links when I’m looking for information about invoicing. I suggest that you bookmark these links and if you ever have a moment of doubting your invoices, you can refer to these websites for answers:
- ATO: Issuing tax invoices
- ATO: Managing business records and setting up invoices
- Australian government: Payment and invoicing
- Australian government: How to create and invoice
Over to you
A quick disclaimer that you should always chat to your accountant about tax requirements. This article is meant as a guide to help you with your invoicing from my years of experience as a bookkeeper. It in no way replaces the advice from your trusted business accountant, or the tax office themselves.
Please feel free to share this with your networks, or with anyone who may be confused about their business invoicing.