How to Invoice as a Contractor in Australia: Tax Invoices Explained

How to Invoice as a Contractor in Australia: Tax Invoices Explained

Issuing professional, legally compliant invoices is essential for every Australian contractor or sole trader. Getting your invoicing right protects your ability to collect payment, allows your clients to claim their GST credits, and keeps you on the right side of the ATO. This guide explains what must be on your invoices and how to get paid efficiently.

What Is a Tax Invoice?

A tax invoice is a document that records a taxable supply of goods or services. If you are registered for GST, you must issue a tax invoice for any taxable supply worth more than $82.50 (GST-inclusive). Your client needs this document to claim their input tax credit on the purchase.

A regular invoice (one without GST) is used when you are not registered for GST, or when a supply is GST-free. However, even if you are not GST-registered, issuing a clear, professional invoice is still good business practice.

What Must Be on a Tax Invoice?

For supplies up to $1,000 (GST-inclusive), a tax invoice must include:

  • The words "Tax Invoice" — the document must be clearly labelled
  • Your identity — your name (or business name) and your ABN
  • Date of issue — the date the invoice is issued
  • Description of the goods or services — enough detail for the recipient to understand what was supplied
  • GST amount — either shown separately, or a statement that the total price includes GST (e.g., "Total includes GST of $X")
  • Total amount payable

For supplies over $1,000, the invoice must also include:

  • The recipient's identity — the buyer's name or business name
  • The recipient's ABN (if they have one)

Invoices Under $1,000

For lower-value supplies, you can issue a simplified tax invoice. You do not need to include the recipient's details. However, all other required elements — your ABN, the date, a description of the supply, the GST amount, and the total — must still be present.

Always double-check that your invoices satisfy the ATO's requirements. If a client cannot claim their GST credit because your invoice is missing required information, it reflects poorly on your professionalism and may delay payment.

Payment Terms

Clear payment terms help you get paid faster and avoid disputes:

  • Standard terms — 30 days from the invoice date is the most common arrangement in Australia
  • Shorter terms — 7 or 14 days is becoming more common, especially for smaller businesses and freelancers; you are entitled to set shorter terms if you choose
  • State your terms on every invoice — include the due date (not just "30 days") so there is no ambiguity
  • Late payment interest — you can charge interest on overdue invoices if this is agreed in your contract or in your terms and conditions; make this clear upfront

Following Up Late Payments

Late payment is frustrating, but a systematic approach resolves most situations:

  1. 7 days overdue — send a polite reminder email, referencing the invoice number, amount, and due date
  2. 14 days overdue — send a firmer follow-up; call the accounts payable contact directly if possible
  3. 30 days overdue — send a formal letter of demand stating that payment is required within 7 days or legal action will be taken
  4. Beyond 30 days — escalate to a small claims tribunal or engage a debt collection agency:
    • Queensland: QCAT (Queensland Civil and Administrative Tribunal)
    • New South Wales: NSW Civil and Administrative Tribunal (NCAT)
    • Victoria: Victorian Civil and Administrative Tribunal (VCAT)
    • Other states have equivalent bodies

Debt collection agencies typically charge a percentage of the recovered debt. Only use them if the amount is significant enough to justify the cost.

Record Keeping

Australian law requires you to keep records that explain all transactions of your business:

  • Keep copies of all invoices for at least 5 years — both invoices you issued (your sales) and invoices you received (your purchases)
  • Use accounting software — Xero, MYOB, Wave (free), and FreshBooks all make invoice creation, tracking, and storage simple; most can integrate with your bank to automate reconciliation
  • Records must be in English or in a form that can be readily converted to English
  • Electronic records are acceptable — you do not need to print and store paper copies, but your electronic records must be accessible and readable

Good record-keeping not only satisfies the ATO but also helps you manage your cash flow, chase overdue invoices, and prepare your BAS and tax return efficiently.

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