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A Simple Guide To Requirements And How To Create A Tax Invoice

For creating a tax invoice, the seller is required to issue a record of purchase that includes the details of the purchase, such as type of product or service, quantity, the agreed cost of the product or service, and the tax amount for each product or service.

In order to claim the paid taxes on the purchase for the business services for the small businesses or big businesses, the buyer is required to have a valid business tax invoice from the seller. You must know that tax invoices act as the main proof to claim back the taxes.

Before moving further to other essential information regarding Australian tax invoices, you must have clear knowledge about what actual tax invoices are.

What is a tax invoice?

It is an invoice that displays the tax return of products and services. It is an invoice in which a list of items is mentioned along with their prices and the indirect tax amount for each item. If a seller is registered for GST(Goods and Services Tax), he must provide tax invoices to his customers.

This invoice must include the description of the sold product or service, the quantity, price, date of shipment, most of the transport, the total value, as well as the tax charged on the products or services.

When a seller sells a product or service along with taxes of more than $82.50 (including GST), the customers with the registered GST will ask for a tax invoice so that they can make a credit claim for the GST in the purchase price.

If, due to any reason, a seller is unable to give a tax invoice, and a customer asks him for it, a seller must provide the valid tax invoices to the accountant within 28 days of the request made by the customer.

Tax invoices must have a minimum of seven types of information. The additional requirements are required for:

  • Tax invoices for sales of $1,000
  • Taxable and non-taxable sales
  • E-invoicing
  • Recipient-created tax invoices

What are the requirements of tax invoices?

When the tax invoices for sales is less than $1,000

If the tax invoices for the sale of products or services less than $1,000, it must include all the required information that determines the following seven details.

  1. The document must be a tax invoice
  2. The identity of a seller
  3. ABN (Australian Business Number) of the seller
  4. The issues date of the invoice
  5. A brief description of the sold products or services, such as name, quantity, and the price
  6. The payable GST amount (if any) must be shown distinctly, or if a GST amount is equal to the 1/11 part of the total price, it is also called as ‘total price includes GST’.
  7. The extent to which each product or service in the invoice is a taxable sale

When the tax invoices for sales is $1,000 or more than $1,000

If the tax invoices for sale or products or services is either $1,000 or more than $1,000, it must include showing the buyer’s identity or ABN.

If the tax invoices meet the requirements for sales of products or services of $1,000 or more than this price, this invoice can be used for selling products or services of lesser amounts.

Taxable and non-taxable sales

If there is a tax invoice that includes both taxable and non-taxable products or services where they are free from GST or input-taxed, then the tax invoice must clearly display the products or services that are taxable. In addition to this, a tax invoice must also include information like:

  • Each product or service that is taxable
  • The amount of GST to be paid
  • The total amount of products/services to be paid

What should be included in the Tax invoice?

As per the Karis Tax & Accounting, there are mandatory details that must be included in the tax invoice.

  • Invoice number and data
  • Name of the customer
  • Shipping and billing address
  • Term ‘Tax invoice’ should be displayed clearly
  • Identity and business number of the seller
  • Description, quantity, and price of the products and services
  • Tax applied to each product or service
  • Total value including tax
  • Supplier’s signature

Tips:

  • In case if you are making an invoice of another business and your ABN is not included, then it is required to suppress the top rate of tax for payment which is more than $75.
  • In case if you are making a tax invoice of more than $1,000, it is required to include the identity or ABN of the buyer.

How to make a tax invoice?

To create a tax invoice in Microsoft Word, you have to follow the given steps.

  • Open a black word file and type ‘Tax Invoice’ as the header.
  • Now, at the right side of the header, you have to enter the details of your business, such as name, address, phone number, and email.
  • Under this information, now on the left side, you have to mention the customer’s information.
  • Don’t forget to add the date of the invoice prepared along with the unique invoice number on the right side of the file.
  • Now, you have to enter the description of the products or services in the body of the invoice. Make sure to enter the prices associated with each product/service.
  • The total amount will include the taxes, delivery charges, etc. It would be good to mention the grand total in bold so that this amount clearly stands out.
  • In the note section, you can add the method of payment and other relevant details.

How to manage fractions in a tax invoice?

Many times it happens that the GST amount includes a fraction of a cent. In case if there is only one product or service in the invoice, the GST amount should simply get rounded to the nearest cent. But in case if the invoice contains more than one taxable sale, you need to follow these rules.

Total invoice rule

In this rule, the unrounded GST amount is added and then rounded to the nearest cent.

Taxable supply rule

In this rule, it is required to work on the GST amount of each product or service. If the unrounded amount has more decimals in comparison to your accounting system, then round this amount up or down to the nearest cent. Then, add the individual amount and round it up to the nearest cent.

Tax invoice is used to take the benefits of tax credits. Also, it plays a great role in identifying transactions in a state’s tax system. It is very important to issue an invoice when products and services are supplied to the customers or when the items reach the customers.

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