It never ceases to amaze me that in this day and age, business owners (usually sole traders) still don’t know how to create a valid invoice.
ATO Invoice Guidelines
As most startups do the invoicing themselves in Word or Excel until they work out what accounting system will work for them, it is imperative that you understand the ATO invoice guidelines on what is required to be included on your invoices.
Invalid Invoices – oh no!
Without a valid invoice your customers may delay payment, wihthold extra tax – or worse still – not pay at all until you fix the invoice! And your clients are not under any obligation to tell you why they are not paying your invoice until you ask. This could cause massive cash flow issues with your business.
- Firstly – there are two types of invoices – “Tax invoices” and “Invoices”. Yes – these are different.
- Tax invoices can only be issued by those entities that are registered for GST. If you are not registered for GST you must have the heading “Invoice” and not “Tax Invoice”.
- On ALL types of invoices (regardless of GST status) you must have a date and an invoice number.
- If you are not registered for GST (which is how most sole traders start out) you must have wording on your invoices such as “No GST has been charged”.
- You must put your ABN and your Business name on the invoice. If you fail to provide a valid ABN, the person paying the invoice can withhold up to the top marginal tax rate from your payment.
- If registered for GST, you must put who the invoice is for: ie – the business name or individual who requested your product or services.
- If registered for GST, you must declare how much of the total invoice contains GST. This can be done on a line by line basis, or a general 10% total if the entire invoice attracts GST.
Some of this may seem trivial – but they are not my rules !
Please – take a minute to ensure your invoice system (whatever it may be) is accurately producing valid invoices for your business.
If you have any questions … don’t be afraid to ask. It doesn’t cost to ask, but it will cost your business to get it wrong.