Why do we need an Invoice?
An invoice is a document that itemizes and records a transaction between a buyer and a seller. It helps both the business(seller) and customer(buyer) to prove that they have fulfilled their end of the business. It is a notice given to customers from businesses to pay for goods or services provided, further, it gives the record of the purchase. Invoice is required for business and legal reasons, business reasons include -requesting payments, analysis and legal reasons means for filing taxes and settling business claims.
Nowadays most invoices are transmitted electronically, invoice must be accurate and complete. They secure business payment, and they provide clarity and protection when the books are wrong. It protects business cash flow, maintains good records and meets tax obligations. When business sends an invoice to the customers, they also serve to track the inventory. Payments expected to pay at later date become accounts payable for the buyer and accounts receivable for the seller. Invoices are also useful for freelancers and contract workers to get paid and track their earnings.
Check your invoice type:
The type and specification of invoices will purely depend upon your business type. If your business is like:
- Registered for GST-. For all the goods and services sold a tax invoice should have GST included in the invoice. The business is required to provide a valid tax invoice that contains certain information.
- not registered for GST – If the customer request a tax invoice and businesses are not registered for GST then they only need to provide a regular invoice showing there is no GST included in the price. The invoice can include the statement “No GST Charged” or can show the GST amount as Zero.
What all to include in an invoice?
Every business should have a standard template for the invoice, this will help the customer to find important information easily. If the business wants to have a custom design tax invoice, then needs to ensure these requirements are included in the invoice. It should state it is an invoice on the face of the bill, other details to be included in the invoice:
- Business name
- A unique invoice number.
- Business contact details.
- Australian business number (ABN)
- Date of the invoice issued
- Customer Details
- Due Date of the invoice.
- a brief list of the items sold, including quantity and price.
- GST amount (if any).
- payment terms and details.
Add on for Tax Invoice
As per ATO for a valid tax invoice following 7 mandatory requirements need to include. It also depends on the total amount of the tax invoice.
For sales of goods or services less than $1,000 (including GST), tax invoices must include:
- The words ‘Tax invoice’ – preferably at the top should be there
- Business identity as the seller is a must, such as business name or trading name (contact details are optional, but recommended)
- Businesses Australian business number (ABN)
- Issued date of the invoice
- A brief list of items sold, including quantity and price.
- Businesses should display the GST amount for each item separately, or, if the GST amount is exactly one-eleventh of the total price, you can use a statement such as ‘Total price includes GST’
- The extent to which each item is sold includes GST. Businesses should meet this requirement if either of:
- show the GST amount for each item
- clearly state that the total price includes GST.
- If a tax invoice has non-taxable items, then it must clearly show which items are taxable. Items are non-taxable if they are GST-free or input-taxed.
Further Buyer’ identity number / ABN should also be shown in the invoice if the tax invoices for sales of $1000 (including GST) or more.
Key Take-Away:
As per ATO for a valid tax invoice following 7 mandatory requirements need to include. It also depends on the total amount of the tax invoice. For sales of goods or services less than $1,000 (including GST), tax invoices must include:
- The words ‘Tax invoice’ – preferably at the top should be there
- Business identity as the seller is a must, such as business name or trading name (contact details are optional, but recommended)
- Businesses Australian business number (ABN)
- Issued date of the invoice
- A brief list of items sold, including quantity and price.
- Businesses should display the GST amount for each item separately, or, if the GST amount is exactly one-eleventh of the total price, you can use a statement such as ‘Total price includes GST’
- The extent to which each item is sold includes GST. Businesses should meet this requirement if either of:
- show the GST amount for each item
- clearly state that the total price includes GST.
- If a tax invoice has non-taxable items, then it must clearly show which items are taxable. Items are non-taxable if they are GST-free or input-taxed.
Further Buyer’ identity number / ABN should also be shown in the invoice if the tax invoices for sales of $1000 (including GST) or more.
