Do Your Tax Invoices Say The Right Things?
Invoicing might seem like a small detail, but getting it wrong can cost you big! In lost trust, compliance issues, and missed deductions (on both your end, and your clients!). Whether you’re GST registered or not, making sure your tax invoices say the right things is essential for both professionalism and keeping your finances in order.
The Impact of a Poor Invoice
Imagine receiving a handwritten invoice with no ABN or missing key details. Instantly, it raises red flags (and if it doesn’t, it should 😬). Can you trust this business? The same goes for your own invoices to your customers, if your invoices aren’t up to standard, it can affect how professional and trustworthy your business appears. Worse, it can seriously impact your financials.
If you’re showing & charging GST when you’re not registered, you’re messing up your sales figures. On the flip side, if you’re not charging GST when you should be, you could be hit with hefty bills from the ATO. Compliance issues aside, poor invoicing could also mean missed revenue and delayed payments.
Why Invoice Compliance Matters
Many businesses still issue non-compliant invoices, often unknowingly, leaving their clients in a tricky spot. Not only can this delay payments coming in to you, but it can also lead to missed claims on their end. To ensure your invoices pass the ATO test, and build confidence with your clients, here’s what you need to include.
Must-Have Elements for GST Registered Invoices:
If your business is GST registered, your invoice must meet these ATO requirements:
- Clearly state ‘Tax Invoice’ or show the intent of being an invoice, not a quote
- Sellers Identity
- Sellers Australian Business Number (ABN)
- the date the invoice was issued
- brief description and price
- GST amount (if any), this can be shown separately or, if the full 10% GST applies to all line items it can be shown as a statement such as ‘Total Price includes 10% GST’ and:
- the extent of GST on each part of the sale
- Sales over $1000 must also show the buyers identity and/or ABN
If your business is NOT GST registered: you must issue an ‘Invoice’
- it is misleading and therefore not allowable to say ‘Tax Invoice’, because there is no tax involved in the sale
- you also need to meet all of the above: except the GST components
Pro Tip: Do your invoicing through online accounting software, like Xero, to ensure compliance every time, effortlessly.
The Importance of ABNs on invoices
Including your ABN on every invoice isn’t only about meeting ATO requirements, it’s also a mark of professionalism. Your clients can quickly verify your GST registration and ensure they’re claiming correctly on their end.
On the flip side, as a business owner yourself, you should also be diligent when receiving invoices from suppliers. Always check a valid ABN is quoted using the ABR Register. The ATO recommends rechecking the ABNs of your regular suppliers at least every 12 months to ensure they’re still active and registered (or not). This keeps your claims accurate, and your records squeaky clean.
Take Control of your Invoicing with Xero
Invoicing is a key part of running a professional and compliant business. Be leveraging Xero’s powerful features, you can automate these tasks, ensure accuracy and save time 🙌
Don’t let invoicing errors waste your time and hold you back, grab my Xero Money Saver (3 Mistakes Costing you Money) Guide to learn how to make the most of some of Xero’s powerful features and keep your business compliant and professional.
Or if you’d like to get us on the tools to take care of all your invoicing needs, book a discovery call with me to chat about how we can support your business.
Lisa x
