Tax invoices are an inevitable part of doing business in Australia, but many business owners aren’t clear about what needs to be listed on them to ensure they’re valid.
Don’t be tempted to overlook the subject of tax invoices because it sounds dreary. After all, tax invoices are the way you receive the money you’ve worked so hard for, and are also the mechanism that allows you to claim money paid in tax back from the government. This is a business activity that you want to be sure is being performed accurately!
When is a tax invoice required?
If you’re registered for GST, you’re required to issue a tax invoice for any taxable sale greater than $82.50 (including GST), if requested by the purchaser.
Similarly, you should hold a tax invoice for any purchase of more than $82.50 (including GST) that you’re claiming a GST credit for.
What should be included on a tax invoice?
When the GST system was first introduced, there were stringent requirements set forth by the Australian Taxation Office regarding exactly what should be included on the tax invoice. These requirements were simplified last year, which has lessened the stress for business owners.
Nevertheless, in order to be considered a tax invoice, your invoice does have to be in the correct form and contain sufficient information. The items that need to be listed on it include:
- The supplier’s identity and ABN,
- What has been supplied, including quantity and price,
- The extent to which each item listed is taxable,
- The date the invoice was issued,
- The amount of GST payable in relation to each item, and
- If the total price is $1,000 or higher, it must also list the recipient’s identity or ABN.
What if a tax invoice doesn’t include all the required information?
If an intended invoice doesn’t contain all of this information or doesn’t display it clearly, you may still be able to treat it as valid if the missing information is identifiable from other documents provided by the supplier. This measure reduces the cost of additional follow up with suppliers.
If you do claim a GST credit without having a valid tax invoice, you can contact the ATO to explain your circumstances and ask that it be treated as though it was valid. Generally, they’ll agree to this if you’re entitled to the GST credit and have made a genuine attempt to meet the requirements.
How long should I keep tax invoices?
You’re legally required to maintain records of any tax invoices you issue or receive if you intend to claim upon them. If invoices have been misplaced, the ATO may accept some other documentation as valid, but it depends on the details you’re able to provide.
Once you’ve claimed for them, it’s a legal requirement that you keep records of all tax invoices for at least a five-year period.
What do the recent changes mean?
If your business was in compliance with the initial requirements for tax invoices, you’re not required to make any changes to your existing systems as a result of last year’s amendments. Tax invoices complying with the previous guidelines will continue to be considered valid tax invoices.
If you have any confusion about what comprises a tax invoice or other record-making and keeping processes, seek advice from the Australian Taxation Office or your financial advisors.
If you have any general questions about tax invoices, please share them with us below.