Learn How to Write an Invoice
Whether designing your own invoice or using an existing template, it’s essential to understand your obligations and what you’ll need to include.
A professionally designed invoice allows you to communicate effectively with your clients. You can itemise your costs and fee structure, identify your payment terms, and also allows you to showcase all the services your business has to offer and why they should deal with you.
Whether you design your own invoice or use a crafty modern template provided by your banking institution or accounting software provider such as Xero, QuickBooks or MYOB, as a business owner, you must understand all your legal obligations with an emphasis on what to include under Australian Tax Laws.
Step 1 – Identify the type of invoice you need to create
The invoice you design firstly depends on your business structure, mainly whether your business entity is registered for GST or not.
If your business is registered for GST, you’ll need to ensure that your invoice includes a GST charge of 10% for each applicable item.
Not registered for GST? Then all you’ll need to do is create a simple invoice and only charge/invoice your standard service fee or a fee per product for each item you are invoicing. Important: Do not charge or apply a 10% GST fee to any item on the invoice.
It’s also important to note that not all goods and services are subject to a GST charge. To better understand what products and services are GST-free, ask your accountant or visit the Australian Tax Office site here for a detailed description.
What is GST, and do I need to register my business for GST?
If you operate a business or plan to operate a business or other enterprise with a turnover of $75,000 or more, or you provide taxi travel (including ride-sourcing) – you will need to register for GST.
Many businesses that earn less than $75,000 register for GST for other tax-related reasons or benefits; it is best to ask your accountant for further clarification because each business is unique with its particular requirements.
Step 2 – Your invoice must include the following requirements.
No matter what type of invoice you are creating, GST, no-GST, Tax Invoice or simple invoice, there are some obligations and requirements each invoice must have, and they are as follows:
- A large and clear title header to indicate that the document is an Invoice (non-GST) or Tax Invoice (if you are registered for GST and charging so)
- A unique or exclusive invoice number
- The date that the invoice was issued
- The Due date for payment of the invoice and payment terms
- The total amount in AU$ to be paid
- Your business name and logo
- Instructions on how to pay, including your bank account details for direct deposits, and any other payment methods you accept, including credit card payments, cheques, or money orders
- Your debt collection policies and charges, if applicable.
You can get more detailed information and guidance from the ATO website located here.
Step 3 – Better understand how to itemise tax information in your invoice.
If you’re not registered for GST, you will not be required to itemise any tax-related information.
However, if you are registered for GST, you need to itemise and describe the GST amount on your Tax Invoice for the goods and services you are supplying. You can do this one of two ways, and they are as follows:
- Include the GST portion in the total price of the goods or services you are delivering and advise that ‘all prices inclusive of GST’; or
- Itemise the GST as a line item for each good or service you deliver, which is calculated at 10% of the value of the line item.
As previously mentioned, GST does not apply to all goods and services, so if you’re delivering a combined mix of GST-inclusive and non-GST items, you will need to ensure that your invoice reflects the tax applied for each item separately.
You can use the Australian government’s GST calculator if you’re still unsure how to charge GST for your goods or services.
Step 4 – Communicate any monthly specials or important updates.
Creating an invoice can help your business’s cash flow and inform your customers about upcoming specials that your business has to offer.
Here are some ideas:
- 15% discount offer on your next purchase
- Order this month and get two for the price of one
- Thank you for your business
- You are now a preferred client – 15% off everything
- Join our free membership to start earning rewards
- Unlimited Customer Support – Call 1300 000 000
- Your business means a lot – 10% discount code off your next purchase
- Christmas Holidays Season – Reduced Hours of Trade
Remember, you’ll always have your client’s attention when they’re reading your invoice, so communicate the right message. Expressions of gratitude go a long way.
Step 5 – How to send and track your invoices
The platform you’re using to create the invoice (e.g. your banking institution or accounting or invoice software providers such as Xero, QuickBooks or MYOB) will determine how invoices will be sent and tracked.
Electronic invoicing (e-invoicing) is the most popular option for small businesses to send and track their invoices through to payment, making it even easier to reconcile at tax time or when lodging your BAS statements.
QUICK TIP: accounting packages such as Xero, QuickBooks and MYOB each have a monthly subscription, but offer many extra benefits. However, many banking institutions offer free invoice-generating solutions, so please speak with your bank before deciding what will suit your business best
Step 6 – Know how often you should send your invoices.
When to create and send your invoice depends on your business structure.
If you’re registered for GST, then invoicing comes with extra inclusions and obligations. E.g. If your customer asks for a Tax Invoice, you must provide one within 28 days.
If you’re not registered for GST, or your invoices are under $82.50 per transaction, you can send the invoice once you’ve supplied the goods or services or whenever you agree with your customer.
It’s always best to seek guidance from your accountant as they always keep up to date with any tax law changes and obligations.
Step 7 – Always keep your accounting records up-to-date.
Keeping your account records up-to-date is fundamental to the success of your business and peace of mind. Good bookkeeping practices help you to manage cash flow, minimise your losses, meet any legal, regulatory and tax obligations or requirements and improve your financial analytics, allowing you better to understand your business at any point in time.
Ask your bookkeeper or accountant how best to set up an efficient and accurate record-keeping system.
Invoicing does not cease once your invoice is issued. You will still need to track the progress of your invoice until payment is received.
Always have open communications with your clients so that you’re always on top of any issues that come up from time to time, and follow up on any invoices that have not been paid on time. Many of these tasks can be automated depending on which platform you use to send invoices.
Remember to keep all your business records, including invoices and receipts, for at least five years. This is an Australian Tax legal requirement for all businesses.
For other business tips, try some of our other helpful resources:
Disclaimer: All information provided on this webpage is general information about our business in Australia, and products and services. Nothing on this webpage is intended to be professional advice and should not be relied on as such. You should obtain specific financial, legal, or other professional advice before relying on the content of this webpage. By not seeking such advice, you accept the risk that the information on this webpage may not meet the specific needs of your business. Our liability is limited to the maximum extent permitted by applicable law in accordance with our website terms and conditions.