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An invoice is a record of purchase that allows your customers to pay you for the goods or services that you’ve provided. It gives your customers details of their purchase, including the:

  • type of product or service provided
  • quantity
  • price agreed to

There are different types of invoice. Make sure you know which one to use. Proper invoicing helps you to protect your business’ cash flow, maintain good records and meet your tax obligations.

Regular invoices

If you run a business that is not registered for goods and services tax (GST), your invoices won’t include a tax component. These are called regular invoices. They should not include the words 'tax invoice'.

Tax invoices

If you’re registered for GST, you must provide tax invoices. Tax invoices include the GST amount for each item along with some extra details. You need to provide a tax invoice if any of these apply:

  • The purchase is taxable.
  • The purchase is more than $82.50 (including GST).
  • Your customer asks for a tax invoice.

If your customer asks for a tax invoice and you’re not registered for GST, show on your invoice that there is no GST. You can do this by including the statement ‘price does not include GST’ or showing the GST as nil or zero.

Find out how to register for GST.

Go to the Australian Taxation Office (ATO) website to find out when to charge GST for items on your invoices.

If you’re after an invoice to claim GST credits, head to the ATO website to learn when you need a tax invoice.

Recipient created tax invoices

In special cases, the buyer can provide you with the tax invoice. These are called recipient created tax invoices (RCTIs).

Go to the ATO website to learn more about RCTIs, including when and how you can use them.

Example of when to use a RCTIs

RCTIs can be used if you sell a farming product and the buyer determines its value.

For example, sugar cane mills test crushed sugar cane for its sugar content. They decide how much to pay the seller based on the sugar content.

Once the mill knows the value of the sugar cane, it provides the seller with a recipient created tax invoice.

What to do before you start invoicing

Before you start invoicing your customers, consider a way to set up customer accounts. If you don’t, you might find your invoicing system becomes too complex.

Here are some tips to help you prepare for invoicing:

  • Consider using accounting software to help you manage invoicing and recording customer sales.
  • Set up a business bank account.
  • Get details from your customer that you’ll need for invoicing. This includes their name, address, phone, email and ABN (needed for tax invoices).
  • Choose your accepted payment methods and payment terms.
  • Once a customer receives their goods or services, contact them to make sure there are no issues or defects. This will help you avoid disputes and delays in getting paid. It’s also good customer service.

Head to the ATO website to find out how to set up your invoices.

Payment terms

Your business payment terms are:

  • the way you let your customers pay for your goods or services
  • when you expect them to pay by

Payment terms usually include:

  • what payments methods you accept
  • whether you provide credit and the terms of credit
  • debt collection policies

In Australia, payment terms are part of a sales contract. This means they are under contract law. Read our understanding contracts topic to learn more.

Why payment terms are important

Payment terms affect your business:

  • income
  • costs   
  • risk of insolvency
  • cash flow – offering credit makes your cash flow less predictable

Credit terms

Offering credit means giving your customers goods or services upfront without payment. If a customer buys on credit, they owe your business a debt. Standard terms of credit include:

  • no credit
  • 7 days to pay
  • 21 days to pay
  • 28 days to pay

Offering credit increases your sales. But it can be risky if your customers don’t or can’t pay their debts. You may use credit checks to reduce the risk. You may also restrict credit if you’re concerned that a customer might not be able to repay. Note that the buyer does not own the goods until they’ve paid you in full.

Debt collection policies

Your debt collection policies describe what you’ll do if a customer doesn’t pay their debt. Examples of debt collection activities include:

Debt collection costs you time and money. It’s a good idea not to spend too much time collecting debts – if it’s not worth it.

Read our tips on what to do when you haven’t been paid information.