What is a tax invoice?

Who the document is really for

The seller's interest in an invoice ends at getting paid, so it is easy to treat the required fields as bureaucracy. They exist for the buyer. Without a compliant document the buyer cannot recover the GST embedded in the price, which on a five thousand dollar purchase is a real amount of money they will chase rather than absorb. That is why a missing business number turns into three emails and a delayed payment, and why large customers reject invoices automatically at the point of receipt rather than after approval. A supplier who gets the fields right on the first send is paid faster, not because anybody is grateful but because the invoice never enters the exceptions queue in the first place.

The two thresholds worth memorising

The first is eighty two dollars and fifty cents including GST. At or below that, a seller does not have to issue a tax invoice even when asked, though most do because buyers keep asking. The second is one thousand dollars. Below it, seven details are required. At or above it, the invoice also has to identify the buyer, either by name or by their business number. Since an invoice that meets the higher standard also satisfies the lower one, the simple answer for a small business is to build one template that always names the customer and always carries every field, and stop thinking about which side of a threshold a job falls on.

Mixed supplies, and the field people get wrong

The requirement to show the extent to which each sale is taxable is the one that trips up businesses selling a mixture. Fresh food, most medical services, some education and some exports are not taxable, and an invoice that lists them next to taxable lines with a single total at the bottom does not tell the buyer or the tax office which is which. Mark each line, show the GST on the taxable lines and give a total that reconciles. Where every line is taxable and the GST is exactly one eleventh of the total, the shorter route is allowed: a statement that the total price includes GST does the job of the separate amount.

Format, delivery and how long to keep it

There is no requirement for paper. Emailing a PDF is a tax invoice provided the document itself carries the required information, and the same is true of electronic invoicing exchanged directly between accounting systems on the national framework, where the absence of the literal words tax invoice does not disqualify it. What does matter is retention. Keep the records for five years, in a form that can still be read, and keep them somewhere that is not one person's mailbox. The most common failure is not a missing field but a missing file, discovered during a review of a year that closed long ago.

When the invoice turns out to be wrong

Do not edit and resend, and do not delete. An issued invoice has entered both parties' records and, in most cases, fixed the period the sale is reported in. The correction is a separate document that reverses the error, in whole or in part, followed by a fresh invoice if one is needed. That leaves three documents in the file rather than one, which looks untidy and is exactly what an auditor wants to see, because the trail shows what happened rather than presenting a tidy end state with no history. The same applies to a duplicate: credit it rather than pretending it never existed. Where the error is in the buyer's favour, tell them rather than waiting to be asked, since a customer who finds an overcharge themselves treats every later invoice with suspicion. Where it is in yours, correct it in the same period if you can, because a correction crossing a reporting boundary is more work for both bookkeepers than the amount usually justifies.

Questions people ask