Tax invoices

Essential data |  Wriggle room |  'Buyer' invoices

The humble invoice took on a central role in the revenue collection system of Australia in 2000, although the occasion was possibly overshadowed in the lead up to the Sydney Olympics.

But the introduction of the goods and services tax (GST) that year was certainly a gold medal winning tax collection initiative. In its first financial year, GST was attributed with having added $24.4 billion to Australia's coffers, extracted from taxpayers' pockets.

But before you thump the desk, it should be pointed out that some other taxes were abolished, and many necessities exempted from the new tax. The first GST year's cost of living increase, widely feared to mirror the GST's 10%, was actually less than a modest 3%.

But so much for the history lesson.

Today's tax invoice is the ticket to this tax manna. The tax invoice serves to both collect the government's take and record GST credits that are claimable for every business (for more information, go to the GST essentials page.)

Essential data
For starters, an invoice needs to be clearly labelled 'tax invoice' and ideally should contain certain information to be valid. Not having all the correct details used to mean that technically the Tax Office could knock back a business's claim for a GST credit in respect of the taxable supplies involved, however from July 1, 2010, the hard-and-fast rules have been relaxed somewhat (see below).

For sales of $1,000 or more, as well as needing to display the words 'tax invoice' prominently, tax invoices have to list the supplier's name and ABN, the date of issue, buyer name and ABN or address, a brief description of the items or services sold, and the total price of the sale (whether the GST-exclusive amount and the GST amount are shown separately, or whether the GST-inclusive amount is noted as including GST).

Invoices for less than $1,000 need to have all the above but not the buyer's details.

In the event that a tax invoice lists both taxable items and GST-free items, to be able to claim credits the tax invoice needs to identify each taxable item and show the GST part of the total payable. The dollar thresholds for tax invoices refer to the taxable items only.

Every business registered in the GST system needs to issue a valid tax invoice if a purchaser asks for one, but also for any taxable sale made that is more than $82.50. (Why that seemingly random amount you ask? It's just $75 plus the GST that would usually be added. The bar was set at $50 back in that Olympic year and has, like a lot of things, just crept up since then.)

And to be able to claim a GST credit for transactions that are less than $82.50, you'll need to have cash register dockets or receipts to support your claim.

Relax: Some wriggle room on invoice requirements
From July 1, 2010, the Tax Office's requirements for the content of tax invoices became more flexible and less prescriptive – it means that documents that contain minor 'discrepancies' which would have previously disqualified them from being treated as bona fide tax invoices will pass muster.

If key information appears to be missing from a supplier's invoice, you can still treat it as a tax invoice if it is clear that the document is intended as such and that the missing information is readily ascertainable from other documentation from the same supplier. The supplier, as was the case before, will still be required to supply a 'proper' tax invoice if asked for one. The concession does not apply to adjustment notes or recipient created adjustment notes.

'Buyer' invoices
In some circumstances, it is the receiver of goods that determines the price paid, such as for example some agricultural products that are sent to a stock agent where the final price is determined at a wholesale market, or when the items need to undergo valuation, as with metals where the daily 'buy' price changes.

In these situations, the tax invoice will need to be generated by the buyer, not the seller.  Called 'recipient created' tax invoices (RCTIs), these are acceptable for claiming credits if both seller and buyer are registered for GST, they agree in writing to the invoicing arrangement, and the items dealt with are of the types the Tax Office has approved to be invoiced this way.

A valid RCTI needs to contain the same information as a normal tax invoice, with the words 'recipient created tax invoice' on it (and while the relaxed requirements mentioned above also apply to RCTIs, the recipient's ABN is a must, as is spelling out that the supplier is the one liable for any GST).

Tax invoice examples

Reviewed July 18, 2012

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