In this article
The goods and services tax (GST) is part of the way we do business in Australia.
Tax invoices record the amount of GST paid in a transaction.
The ATO has strict rules and requirements for businesses creating tax invoices.
The good news is your business can use tax invoices to claim GST credits on purchases.
In this article, we’ll cover:
simple tax invoice explanation
when you need to issue a tax invoice
what to include in a tax invoice
keeping tax invoices for GST credits
other common questions
What is a tax invoice?
A tax invoice is a type of invoice created to record the amount of GST paid on a transaction.
Businesses registered for GST need to create tax invoices upon request from customers.
To stay compliant, tax invoices must include specific details set by the ATO.
Why are tax invoices necessary?
Tax invoices are important to create and collect because they are:
proof of GST charged
records of GST paid
Not sure if you need to register for GST? Learn more about GST registration.
When do I need to send a tax invoice to a customer?
As a GST-registered business, if a customer requests a tax invoice, you must provide one within 28 days, unless it is for a sale of $82.50 (including GST) or less.
Tax invoice vs. receipt vs. regular invoice: What’s the difference?
Purpose of receipts, invoices, and tax invoices
While they look similar, receipts, invoices, and tax invoices have different functions:
Regular invoices | Receipts | Tax invoices |
A payment request | Proof of purchase | Evidence of GST charged on a taxable sale |
Tax invoice vs. regular invoice
While regular invoices request payment, tax invoices are for GST purposes. As a result, tax invoices are subject to stricter ATO requirements.
If you're not registered for GST, regular invoices don't need tax information.
Regular invoices without GST information should not include the words ‘tax invoice'.
Tax invoice vs. receipt
While they might seem similar on the surface, tax invoices and receipts are not the same.
Similarities between tax invoices and receipts:
Sellers create both tax invoices and receipts
Sellers give receipts or tax invoices to buyers (customers)
Receipts and tax invoices both show items purchased
The key difference between a tax invoice and a receipt is that tax invoices have stricter ATO requirements.
A receipt can serve as a tax invoice only if it meets the ATO tax invoice requirements.
Tax invoice requirements
ATO tax invoice requirements vary depending on the sale price.
Tax invoice requirements for sales under $1,000
Tax invoices for sales under $1,000 must include each of the following items:
a clear statement that the document is a tax invoice
the seller's identity (business name)
seller's ABN
issue date
itemised list – brief description of items sold, including quantity (if applicable), and the price
GST amount payable (if any) – can be shown separately or, if the GST amount is exactly 1/11 of the total price, as a statement which says, 'Total price includes GST.'
the extent to which each sale on the invoice is a taxable sale
Tax invoice requirements for sales of $1,000 or more
In addition to the seller's identity, tax invoices of $1,000 or more also need to include the buyer’s identity or ABN.
If a tax invoice meets the requirements for sales of $1,000 or more, you can use it for sales of lesser amounts.
See visual example of tax invoice for $1,000 or more.
The tax invoice example includes essential details, such as:
GST included in each line item
a clear statement that the sale is fully taxable (using the text 'The total price includes GST')
the buyer’s identity
the seller’s identity
Find detailed legal requirements via GSTR 2013/1, Goods and services tax: tax invoices.
Using eInvoicing to send tax invoices
Invoicing software simplifies invoicing with reusable templates. Invoices are ready to send fast, with the right information for GST compliance. Plus, you have automatic records for sales that include GST, ready at tax time.
Why should I request tax invoices for my business purchases?
Tax invoices can allow you to claim credit for GST paid on business purchases. Since GST is 10% of the price of goods or services, tax credits can add up!
As a business owner, you can request tax invoices from your suppliers. Organised digital records make it easier to claim the credits you’re entitled to.
Learn more about GST reimbursements and credits.
Why should I keep tax invoice records?
You need to keep tax invoices for the following reasons:
Written evidence of business expenses from your suppliers
Written evidence of income with GST included in sales
How long do tax invoices need to be kept for ATO compliance?
According to the ATO, you must keep tax invoice records for 5 years.
Record-keeping methods
Traditionally, you would need to request and file paper-based tax invoices. These days, online accounting and reporting tools can help to keep records long-term.
Digital bookkeeping tools
Keep organised digital records so you’re ready for tax time.
Platforms like MYOB can automatically calculate your tax and GST. Plus, MYOB can lodge your tax reports direct to the ATO.
With the MYOB Assist app, snap photos of tax invoices on the go or upload images from your camera roll.
How to handle the rounding of GST in Australian tax invoices
In some instances, the amount of GST will include a fraction of a cent. In these cases, special rounding rules apply. Where there’s more than one taxable sale on a tax invoice, the ATO has two rules:
total invoice rule
taxable sale rule
Customers and their suppliers don't need to use the same rounding rules.
Total invoice rule
Under the total invoice rule, you can follow these steps:
calculate the total
round GST for each taxable sale to the nearest cent (rounding 0.5 cents upwards)
Or, in cases where the taxable sales for every item include GST of exactly 1/11 of the price, you can follow these steps:
add up the GST-exclusive value of each taxable sale
calculate GST on that amount
round to the nearest cent (rounding 0.5 cents upwards).
Taxable sale rule
For the taxable sale rule, follow these steps:
you work out the amount of GST for each individual taxable sale
add up these individual amounts
round the total to the nearest cent
Can a purchaser (or recipient) issue a tax invoice?
Typically, a seller produces the tax invoice. However, in some circumstances, the buyer can issue the tax invoice. The ATO calls this a Recipient Created Tax Invoice (RCTI).
When can I create an RCTI?
If you are intending to create an RCTI as the purchaser, you can only do so if:
you and the seller are both registered for GST
you and the seller both agree (in writing) that you will issue the tax invoice, rather than the seller
the agreement is current and effective at the time you issue the RCTI
the Commissioner has determined that the type of goods or services sold under the agreement can be invoiced using an RCTI.
If you don’t meet all these requirements, you must request tax invoices from the seller.
Common mistakes to avoid
Even experienced business owners can slip up with GST record-keeping. Avoid these common mistakes to stay compliant:
Mistakes to avoid | Ways to stay compliant |
Failing to provide tax invoices within 28 days of a customer request | Use invoicing software to make invoicing faster and easier. Use a mobile invoicing app to send invoices direct from your phone. |
Forgetting to claim GST credits | Use financial reporting software that lodges direct to the ATO. Work with a qualified financial advisor to ensure you claim all the credits you’re entitled to. |
Not requesting tax invoices | Request tax invoices for all business purchases over $82.50 (including GST). |
Losing or missing tax invoices | Use expense management tools to record tax invoices on the spot. Use a mobile receipt capture app to take photos of tax invoices on the spot. |
Discarding tax invoice records too early | Use cloud accounting software to securely store tax invoice records for 5 years. |
Issuing RCTIs without meeting ATO criteria | Only create RCTIs if you meet all ATO criteria. Keep a record of the written agreement enabling you to create the RCTI. |
Automate tax invoicing and GST reporting, in one place
Tax invoices are a tedious, but necessary part of doing business in Australia.
Skip the manual work and automate your invoicing and reporting with MYOB.
MYOB can send your tax reports straight to the ATO, making it easier to stay compliant.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.