In business, it is important to ensure your accounts documentation follows the rules as set out by the Australian Taxation Office (ATO) and other relevant legislation. Sales invoices are one such item that is frequently used in business. Unfortunately, sales invoices are also often set up incorrectly.
We have created an easy-to-use checklist to help you create sales invoices that comply with the ATO requirements. Follow the steps below when setting up your invoice template in the accounts receivable section of your accounting software.
Are you registered for GST?
The first step is to consider whether you are registered for GST or not? GST registration is not required to operate a business, however, the rules for issuing sales invoices are slightly different.
- If you are registered for GST, your invoices must state “Tax Invoice” on them.
- If you are not registered for GST, your invoices should not have the words “Tax Invoice” on them. As you are not registered for GST, your invoices are not a taxable supply and 3rd parties will need to exclude them from their BAS statements.
Information to be included on all sales invoices
The following information is required on all invoices, whether a Tax Invoice or a non-GST registered sales invoice.
- Your Business Identity including your ABN.
- Invoice date.
- Invoice number.
- Description of what was sold.
- Purchase order numbers, if requested.
- Other industry-related compliance criteria.
- Total Balance Outstanding.
There is one additional point of information that is not compliance related but you need on your invoice. You must show the method(s) of paying your business for the invoice!
Additional information for Tax Invoices less than $1000
Tax Invoices (as opposed to non-GST sales invoices as noted above) require additional and specific GST-related information to be included.
- GST Collectable.
- If the sale is clearly identified as being fully taxable by the words ‘Total price includes GST’.
- Total Balance Outstanding Including GST.
For Invoices greater than $1000
Invoices over $1000 must contain the above plus the following details;
- The buyer’s identity or ABN.
- For Tax Invoices, the GST Collectable per item line.
Important additions to include are:
Most sales invoices will benefit from a few extra additions. Whilst not legally required, they simplify and clarify the conditions upon which you are to be paid.
- Credit Terms. What date do you expect payment by? You would think this is a legal requirement.
- Are you going to charge interest on late payment? Think about this one before you supply goods and services as it is not legal to charge interest after the sale unless this has been previously stated.
To legally comply with interest charged on invoices you MUST include in the Terms and Conditions of your contract before goods and services are provided, which the customer agrees to, the following:
- Interest will be charged on overdue payments.
- Only charge a “fair and reasonable” percentage on overdue payments.
- Due date of payment.
- Interest charged commences following the due date.
All accounts are payable, in full, within 7 days of the date of issue. If your account is not paid by the due date, interest will be charged on the outstanding amount after the due date, in accordance with the % rate set by the Supreme Court of NSW or Australia at the time the invoices is overdue.
When you are registered for GST and make a sale of more than $82.50 (including GST), business customers registered for GST will need a Tax Invoice from you to claim the GST in the purchase price.
If you are having difficulty please call contact me we will help you.