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How to create and issue invoices: ATO's guidelines for Australian businesses

  • Last Updated : October 20, 2023
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  • 4 Min Read
photo of a Eftpos machine with receipt paper

An invoice is a crucial indicator of your business’ health. Not only is it an acknowledgement of money spent and accrued, but it can also help you identify seasonal patterns in your business. More importantly, though, the Australian Tax Office (ATO) requires every Australian business to maintain records of their purchases and sales. In this blog, we’ll discuss when you should issue invoices, what to include, and how you can streamline the invoicing process.

When Aussie businesses should create an invoice

When you sell products or services for $82.50 or more, including GST, you should issue an invoice. If your customer is a business and is registered for GST and the total price they've paid you is over $82.50, they’ll need this invoice to claim their GST credit. As the seller, you should issue an invoice within 28 days of your customer requesting one.

Recipient-created tax invoice (RCTI): In some special cases, your buyer can create their own invoices for their purchases. Only certain business functions are eligible for RCTI, and for it to be valid, you and your buyer should have a current RCTI agreement at the time of issue. If your buyer issues an RCTI, you don’t have to issue an additional invoice. Have a look at this template form to understand the components of an RCTI.

What to include on your sales invoices

The ATO requires businesses to include the following elements on sales invoices:

•  Date of issue along with the phrase "tax invoice," or something similar, to identify the document.
•  Your business details, such as name, address, and ABN. If your business is part of a group of businesses, those businesses are considered co-owners of your business.
•  Therefore, your invoice should also include their details.
•  A description of items sold, quantity, and price.
•  GST amount. This can either be specified separately for each product/service or in a statement declaring that the total price includes GST.

If the total value of the sale (including GST) exceeds $1,000, you should include details on the buyer and any of their co-owners, such as business name, address, and ABN.  You can use this GST calculator to work out how much GST you should charge on your invoices.

Based on the nature of your business, you might also want to include other details, such as terms and conditions of the sale, return or refund policies, or a personal note to the buyer.

Making invoicing simple

Invoicing software

Many comprehensive accounting software solutions come with a built-in tool you can use to create invoices from scratch or from templates. Using software is a great way to reduce errors and avoid payment delays. If you're a smaller business and don’t need a comprehensive accounting system, you can use dedicated invoicing software instead.

Invoicing software solutions automate most of the manual work involved in creating and sending invoices. They can:
•  Pre-fill details of your business so you don’t have to do it manually for every invoice
•  Automatically generate invoices for recurring sales
•  Email invoices to your buyers and send reminders for late payments
•  Support multilingual and multi-currency invoices
•  Accept digital signatures to bind your invoices legally
•  Manage any offline payments you’ve received
•  Maintain an accurate record of all your business invoices

e-Invoicing

An e-invoice is similar to a regular invoice, except that it’s sent directly between the seller’s and buyer’s accounting software. This is done through secure and approved access points, using your and your buyer’s ABNs. If you adopt e-invoicing, you won’t have to create and send physical, email, or PDF invoices. To start using e-invoicing technology, you should choose a Peppol-enabled accounting software vendor.

Peppol is the internationally-recognised framework (technical specifications and guidelines) that powers e-invoicing and eProcurement. Australia and New Zealand jointly adopted the Peppol framework in 2019 to enable businesses in the region to use and benefit from e-invoicing.

Every country that adopts the Peppol framework has a Peppol authority. Australia's Peppol authority is the Australian Tax Office. As the authority, it’s the ATO’s responsibility to ensure that accounting software vendors follow and maintain global and local e-invoicing standards. If you start e-invoicing, only you, your buyer, and your accounting software provider will have access to your invoices.

Note: Zoho Invoice is a free invoicing solution. At the time of writing, Zoho Invoice doesn't offer the e-invoicing feature. You can still use Zoho Invoice for business transactions, and your invoices will be emailed to your vendors.

Parting thoughts

Invoicing is a big part of running a business. However, as you can probably tell, it doesn't have to be tedious. We hope this blog post helps you understand what's expected of Australian businesses when it comes to recording sales and maintaining invoices. Luckily, there's technology to simplify and automate the daily grind of invoicing so you can spend more time on business innovation and improvement.

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