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What is a tax invoice?

If you’re registered for Goods and Services Tax (GST), you must provide tax invoices to your customers. But what are the tax invoice requirements and is there a specific tax invoice format that needs to be followed? Read on to find out everything you need to know about tax invoices in Australia.

Tax invoices explained

So, what is a tax invoice? In Australia, when you make taxable sales of $82.50+ (including GST), customers who are registered for GST will need a tax invoice so that they can claim credit for the GST included in the purchase price. Providing tax invoices is non-negotiable, and when a customer asks you for a tax invoice, you are obligated to provide them with one within 28 days of their request.

What are the tax invoice requirements?

When it comes to your tax invoice requirements, there are seven key pieces of information that must be included for sales of less than $1,000. This information is as follows:

  • That the document is intended to be used as a tax invoice

  • The identity of the seller

  • The Australian Business Number (ABN) of the seller

  • The date that the invoice was issued

  • A description of the items that were sold, including quantity and price

  • The GST amount payable (if any)

  • The extent to which each sale on the invoice includes GST

If your tax invoice is for a sale of $1,000 or more, it also needs to show the buyer’s identity or ABN number. You can include this information on tax invoices for lower value sales, but it isn’t necessary.

Tax invoice example

To get a better sense of what’s expected from a tax invoice in Australia, as well as the proper tax invoice format, let’s look at an example. For this tax invoice example, we’ll imagine that it’s for a sale of more than $1,000:

Tax Invoice Company A, Ltd. ABN: 12 123 456 789 Date: 26 June 2020 To: Company B, 123 Main Street, Sydney

 

Quantity

Description

Unit Price

GST

Total

15

Hammers

$25

$2.5

$42.5

10

Saws

$50

$5

$550

5

Drills

$75

$7.5

$412.5

Total Amount Payable

$1375

Issuing tax invoices via e-invoicing

Of course, you don’t need to issue tax invoices on paper. If the invoice adheres to the accepted tax invoice format and meets all the outlined tax invoice requirements, you can also issue them via electronic invoicing software.

How to deal with fractions in a tax invoice

Sometimes, you’ll have to deal with GST amounts that include a fraction of a cent. If there’s only one taxable sale on the invoice, the GST amount should be rounded up to the nearest cent (rounding 0.5 cents upwards). If there’s more than one taxable sale on the invoice, then you need to follow two rules, the total invoice rule and the taxable supply rule:

  • Total invoice rule – The unrounded amounts of GST should be added up and then rounded to the nearest cent (rounding 0.5 cents upwards)

  • Taxable supply rule – First, you need to work out the amount of GST for each taxable sale. If the unrounded amount has more decimal places than your accounting system can count, you should round up or down to the nearest cent. Then, you should add up the individual amounts and round to the nearest cent (rounding 0.5 cents upwards).

Recipient-created tax invoices

While tax invoices in Australia are usually produced by the seller, there are some situations where the purchaser – or recipient – may issue a tax invoice for the purchase. This is referred to as a recipient-created tax invoice (RCTI). You can only issue a recipient-created tax invoice if the following statements apply to your business:

  • You and the seller are registered for GST

  • You agree with the seller in writing that you will issue a RCTI and they will not issue a tax invoice

  • This agreement is current when you issue the RCTI

  • The goods/services can be invoiced using an RCTI

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