GST on invoices: what a tax invoice must show and how to get it right

Registered or not: the first question

Only GST-registered businesses can charge GST or issue a tax invoice. If you are not registered, your invoice is just an invoice: no GST line, no Tax invoice heading, and your total is the total. Some unregistered sole traders add a line such as No GST has been charged to avoid questions; it is not required but it is helpful.

Charging GST when you are not registered is an offence, and the customer cannot claim it anyway. If you are unsure whether you should be registered, see do I need to register for GST.

Tax invoices for sales under $1,000

For a taxable sale under $1,000 (GST inclusive), a tax invoice must show:

• The words Tax invoice, clearly.
• Your identity: business name or your own name as it appears on the ABR.
• Your ABN.
• The date the invoice was issued.
• A description of what was sold, including the quantity if relevant.
• The GST amount, either as a separate line or as a statement such as Total price includes GST when every item is taxable at 10%.

A unique invoice number is not on the ATO’s list but every accountant will want one, and it makes chasing payment easier. Sequential numbering is the norm.

Tax invoices for sales of $1,000 or more

Everything above, plus the buyer’s identity or ABN. For a business customer that is their trading name or ABN; for a member of the public it is their name. Without it the customer cannot claim the GST and may send the invoice back, so ask for the detail when you quote.

Showing GST correctly

You have two options for presenting GST:

• Itemised. Show the ex-GST amount, then the GST, then the total. Example: Services $1,500.00, GST $150.00, Total $1,650.00. This is the clearest and the standard for business customers.
• Inclusive. Show the GST-inclusive total and state Total price includes GST. Only valid if every item on the invoice is taxable.

If an invoice mixes taxable and GST-free items, you must show the GST amount for each taxable item or a subtotal for the taxable part. Say a photographer sells a print (taxable) and shipping to an overseas address (GST-free export): the invoice needs to make clear which line carries GST.

Remember the maths: GST is 10% of the ex-GST price, or one eleventh of the inclusive price. See how to calculate GST.

The no-ABN withholding trap

If you invoice a business without quoting an ABN, the payer is required to withhold tax from the payment at the top marginal rate, currently 47%, and send it to the ATO. You can recover it through your tax return, but that is a long wait for half your money. Put your ABN on every invoice. Small exceptions exist, such as payments under $75 and hobby income, but they are narrow.

Recipient-created tax invoices

In some industries the buyer issues the tax invoice instead of the seller, for example an agency that pays contractors from its own timesheets, or a platform that reports your earnings. This is a recipient-created tax invoice (RCTI) and it needs a written agreement between the parties. If you receive RCTIs, keep them; they are your record of G1 income and the GST on it.

When a customer asks for a tax invoice

A registered customer needs a tax invoice to claim GST on any purchase over $82.50 (GST inclusive), and they are entitled to ask for one within 28 days. Issue it promptly. If you are not registered, tell them so and they will treat the purchase as having no GST. Invoicing software such as FlowFi handles the layout, numbering and GST lines automatically and adds reminders when the invoice goes unpaid.