Published: August 2025

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Creating a tax invoice is a critical task for small and medium businesses (SMBs) in Australia, ensuring compliance with Australian Taxation Office (ATO) requirements and facilitating smooth financial transactions.

In 2025, with over 2.5 million small businesses operating in Australia (Australian Bureau of Statistics data), issuing correct tax invoices is essential for GST reporting and claiming input tax credits.

This guide outlines the steps to create a compliant tax invoice, including legal requirements, practical examples, and tips to streamline the process for SMBs.

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What is a Tax Invoice?

A tax invoice is a document issued by a GST-registered business to a customer, detailing goods or services provided, their cost, and any GST applied. It serves as proof of a transaction and is required for buyers to claim GST credits if eligible. Under the A New Tax System (Goods and Services Tax) Act 1999, tax invoices must meet specific criteria to be valid for ATO purposes, particularly for transactions over $1,000 or when claiming GST credits.

Tax invoices are distinct from regular invoices, which may not include GST details or meet ATO standards. For SMBs, issuing compliant tax invoices ensures accurate Business Activity Statement (BAS) reporting and avoids ATO penalties.

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Why Tax Invoices Matter

• GST Compliance: Required for businesses registered for GST to report taxable sales and claim credits.
• Professionalism: Clear, accurate invoices enhance your business’s credibility with clients.
• Record-Keeping: Supports ATO audits, with records required for five years.
• Cash Flow: Timely, correct invoices encourage prompt client payments, critical for 60% of SMBs facing cash flow issues (2024 ATO data).

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ATO Requirements for a Tax Invoice

The ATO specifies mandatory elements for a tax invoice, depending on the transaction value. Refer to the ATO’s guidelines at https://www.ato.gov.au/Business/GST/Issuing-tax-invoices/ for full details.

For Transactions Under $1,000

A tax invoice must include:

1. The words “Tax Invoice” clearly displayed.
2. Your business name and Australian Business Number (ABN).
3. The date of issue.
4. A brief description of goods or services provided.
5. The total price, including GST (either shown separately or a statement like “Total price includes GST”).

For Transactions Over $1,000

In addition to the above, include: 6. The buyer’s name or ABN. 7. The quantity or volume of goods/services (e.g., hours worked or units sold). 8. The GST amount, shown separately or a statement that GST is included in the total price.

Additional Notes

• If no GST applies (e.g., GST-free supplies like certain foods), state “No GST applies.”
• For mixed supplies (taxable and GST-free), clearly separate GST amounts.
• Invoices must be in Australian dollars and issued within 28 days of the transaction.

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Step-by-Step Guide to Creating a Tax Invoice

Follow these steps to create a compliant tax invoice in 2025:

Step 1: Use Professional Software or Templates

Use accounting software like Xero, MYOB, or QuickBooks, or download ATO-compliant templates from https://www.ato.gov.au/Business/GST/Issuing-tax-invoices/. These tools ensure all required elements are included and automate GST calculations.

• Example: A Sydney graphic designer uses Xero to generate invoices, ensuring ABN and GST details are auto-populated.

Step 2: Include Mandatory Details

Ensure all ATO-required elements are present. For a $1,500 service:

• Header: “Tax Invoice.”
• Business Details: “Jane’s Consulting Services, ABN: 12 345 678 901.”
• Date: 15 August 2025.
• Buyer: “ABC Pty Ltd, ABN: 98 765 432 109.”
• Description: “Marketing consultation, 10 hours at $136.36/hour (excl. GST).”
• Total: $1,500 (GST: $136.36, Total incl. GST: $1,500).

Step 3: Calculate GST Accurately

For GST-registered businesses, add 10% GST to taxable supplies. For the above example:

• Base price: $1,363.64.
• GST (10%): $136.36.
• Total: $1,500. Use the ATO’s GST calculator at https://www.ato.gov.au/Calculators-and-tools/GST-calculator/ for precision.

Use our free GST calculator here!

Step 4: Issue the Invoice Promptly

Send the invoice within 28 days via email, mail, or digital platforms. Include payment terms (e.g., “Due within 14 days”) to encourage timely payment.

• Example: A Brisbane caterer emails an invoice for a $2,000 event, specifying bank details and a 7-day payment term.

Step 5: Keep Records

Store invoices digitally or physically for five years, as required by the ATO. Use cloud-based software for easy access during audits.

• Example: A Perth retailer archives invoices in MYOB, ensuring compliance with ATO record-keeping rules.

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Example Tax Invoice

Tax Invoice
Jane’s Consulting Services
ABN: 12 345 678 901
Date: 15 August 2025
To: ABC Pty Ltd, ABN: 98 765 432 109
Description: Marketing consultation, 10 hours at $136.36/hour (excl. GST)
Subtotal: $1,363.64
GST (10%): $136.36
Total: $1,500.00
Payment due: 29 August 2025
Bank Details: BSB 123-456, Account 78901234

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Common Mistakes to Avoid

• Missing ABN: Failing to include your ABN invalidates the invoice for GST claims.
• Incorrect GST: Miscalculating or not separating GST can lead to BAS errors.
• Late Issuing: Delaying beyond 28 days risks non-compliance.
• Poor Record-Keeping: Not retaining invoices for five years can trigger ATO penalties, up to 75% of underpaid tax.

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Tips for SMBs

• Automate Invoicing: Use software to save time and reduce errors. Xero, for instance, integrates with BAS reporting.
• Include Clear Terms: Specify payment due dates to improve cash flow, e.g., “Due within 7 days.”
• Verify Buyer Details: For transactions over $1,000, confirm the buyer’s ABN via https://abr.business.gov.au/.
• Seek Professional Help: Engage a bookkeeper for complex invoicing or GST reporting to ensure compliance.

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Q&A

What is the difference between a tax invoice and a regular invoice?

A tax invoice meets ATO requirements for GST-registered businesses, including specific details like ABN and GST amounts, while a regular invoice may not.

Do I need a tax invoice if I’m not GST-registered?

No, but you must issue a regular invoice. If registered later, ensure compliance with ATO rules at https://www.ato.gov.au/Business/GST/.

Can I issue a tax invoice for GST-free supplies?

Yes, but state “No GST applies” instead of a GST amount, as per ATO guidelines.

How long must I keep tax invoices?

Five years, as required by the ATO for audit purposes. Use digital tools for secure storage.

What happens if my tax invoice is incorrect?

You can issue a correction or adjustment note. Check ATO guidelines at https://www.ato.gov.au/Business/GST/Issuing-tax-invoices/.

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Sydney Bookkeeper Services

For Australian small and medium businesses needing to create compliant tax invoices and manage finances, Sydney Bookkeeper offers expert advice and can take these tasks away from you. We provide tailored bookkeeping solutions, including automated invoicing setup and BAS preparation, to streamline your financial processes.