Invoicing is how businesses keep cash coming in, stay compliant with tax laws, and maintain good client relationships. But invoices can go unpaid for preventable reasons: unclear payment terms, missing details, or a convoluted invoicing process that makes it difficult for customers to pay on time. Add in Australian Taxation Office (ATO) requirements and goods and services tax (GST) rules, and it’s clear that businesses need to make invoicing a priority.
The right invoicing practices prevent problems, help businesses get paid faster, reduce administrative work, and create a better financial operation. Below is a guide to invoicing best practices in Australia.
What’s in this article?
- What is an invoice, and why does it matter in Australia?
- What information must be included on a valid Australian invoice?
- How can Australian businesses ensure invoice compliance with the ATO?
- What are the best practices for setting invoice payment terms in Australia?
- How can Stripe help with invoice processing?
What is an invoice, and why does it matter in Australia?
An invoice tracks sales, protects cash flow, supports tax compliance, and serves as legal proof of transactions. In Australia, invoices are important for businesses for many reasons, including getting paid on time and meeting ATO requirements. Here’s why invoices matter:
They keep cash flow steady
Invoices are the core of your revenue. Late or vague invoices can lead to delayed payments, which can cause problems with cash flow. For businesses with tight margins, even a few unpaid invoices can disrupt day-to-day operations. A well-structured invoice documents exactly what’s owed, creates a record that makes it easier to follow up on overdue payments, and helps forecast income so you can manage expenses and growth effectively.
They’re required for tax compliance
In Australia, invoicing is a legal requirement in many situations. The ATO has strict rules on how invoices must be formatted, particularly for businesses registered for GST. Regardless of size, every business in Australia needs to issue and store invoices correctly to avoid tax and compliance risks.
They offer legal and contractual protection
An invoice is a legal record of what was agreed upon between the business and the client. If a client disputes a charge, says they didn’t receive a service, or delays payment, your invoice is your first line of defence. A detailed invoice helps enforce payment terms by stating due dates, listing what was delivered, and providing supporting evidence if you need to pursue debt collection.
They provide important business insights
Invoices offer valuable data about your business’s performance. Businesses that process a high volume of transactions use invoice data to make smarter financial decisions, including renegotiating supplier terms and adjusting payment policies. By analysing invoice patterns, you can identify:
Which clients consistently pay late
Which products or services generate the most revenue
How long it takes to receive payments
You can use this information to adjust credit policies, pricing strategies, and money management practices.
What information must be included on a valid Australian invoice?
The ATO has rules on what must be included on invoices. These rules apply to tax invoices (issued by GST-registered businesses) and regular invoices (issued by businesses not registered for GST).
Tax invoice vs. regular invoice
GST-registered businesses must issue tax invoices for taxable sales over $82.50 Australian dollars (AUD) (including GST) within 28 days if a customer requests one. Customers need tax invoices to claim GST credits, and incorrect or missing details can result in tax compliance issues.
Businesses that are not registered for GST use regular invoices. These should not include the words “tax invoice” and should transparently state that no GST is charged (e.g. “No GST has been charged” or showing GST as $0 AUD).
Seven required elements of a valid Australian tax invoice
The ATO mandates that a tax invoice for businesses must include these elements:
The words “tax invoice” prominently displayed
Your registered business name
Your Australian Business Number (ABN)
The invoice issue date
A description of goods or services
The amount of GST payable (if applicable)
The taxable status of each item
If the invoice total is $1,000 AUD or more (including GST), you must also include the customer’s identity or ABN. This ensures large transactions are well-documented.
How can Australian businesses ensure invoice compliance with the ATO?
Meeting ATO invoicing requirements means knowing when to issue invoices, how to store them, and what systems to use. Proper compliance reduces tax risks and prevents unnecessary disputes. Here’s how to keep your invoicing process in line with Australian tax laws:
Apply GST correctly
If you charge GST, your invoice must delineate which items are taxable and the GST amount. If an item is GST-free or exempt, you must also state this. If you’re not registered for GST, you cannot charge it.
Keep invoice records for at least five years
The ATO requires businesses to retain all sales and purchase invoices for at least five years.
Best practices for record retention include storing copies of all invoices (issued and received), keeping supporting documents (e.g. contracts, purchase orders, receipts), and using secure storage, whether digital or physical.
Use digital invoicing and e-recordkeeping
The ATO encourages businesses to use electronic invoicing and digital recordkeeping. Many digital invoicing systems integrate with accounting software to automatically track invoices and flag overdue payments.
Consider e-invoicing for faster, more secure transactions
Australia’s e-invoicing framework, based on the Peppol network, lets businesses exchange invoices directly between accounting systems. This reduces human error, speeds up payments, and improves compliance.
Follow ATO guidelines for special situations
Some businesses operate under specific invoicing rules. One example is recipient-created tax invoices (RCTIs), for which the customer issues the invoice. This is common in industries such as agriculture and construction, but it requires an agreement and specific ATO-approved wording. If your business operates in a specialised sector, check ATO guidelines to confirm compliance with any additional rules.
Train staff and review compliance regularly
Conduct regular internal compliance checks by reviewing a sample of invoices to confirm they meet ATO standards. Tax laws and invoice thresholds can change, so stay updated through the ATO website, or consult with your accountant.
What are the best practices for setting invoice payment terms in Australia?
Even a well-crafted invoice won’t guarantee timely payment if the terms aren’t straightforward or enforced. In Australia, payment terms vary by industry, but businesses that set fair, specific, and enforceable terms are far more likely to maintain steady incomings. Here’s how to set terms that work for you and your clients:
Use standard and clear payment terms
Choosing the right terms depends on your industry, customer type, and how quickly you need to be paid. Australian businesses typically use 7-day, 14-day, or 30-day payment terms:
Freelancers and small service businesses often use 7-day or 14-day terms to encourage faster payment.
Large corporations and government contracts often default to 30 days or more, but the Australian government requires large businesses awarded government contracts over $4 million AUD to pay new subcontractors within 20 days.
Retail and hospitality businesses typically require immediate payment or short terms.
Including vague terms on invoices can lead to misunderstandings and late payments. Instead of writing “payable in 30 days”, specify the exact due date, currency, and accepted payment methods. Many businesses also use financial incentives to encourage fast payment and late fees to discourage delays.
Communicate terms up front and get agreement
Your invoice shouldn’t be the first time a client sees your payment terms. Set expectations before the work begins by including terms in contracts or service agreements, quotes or proposals, and client onboarding documents. If you’re extending trade credit or flexible terms, consider having the client sign a credit terms agreement.
Enforce terms consistently
If you let an invoice slide 15 days past due without following up, that client might assume late payments are acceptable. But being too aggressive can strain relationships. Here’s a sample timeline for how to follow up:
The day after the due date, send a polite reminder. A simple, friendly email often resolves delays without additional action.
One week after the due date, follow up with a more direct email.
Two weeks after the due date, reach out by phone.
If your client is repeatedly making late payments, consider requiring prepayment for future work.
Know your rights if a client doesn’t pay
Australia has taken steps to address late payments to small businesses, such as the Payment Times Reporting Scheme, which requires large businesses to report how quickly they pay suppliers. Some industries have specific laws protecting suppliers. The building and construction industry, for example, has security of payment laws that enforce strict timelines for payments.
Though most clients won’t require legal action, knowing your rights helps if a client repeatedly delays payment. If a client refuses to pay despite multiple follow-ups, you might need to engage a debt collection agency, issue a formal letter of demand, or use the small claims court for persistent non-payment.
How can Stripe help with invoice processing?
Stripe automates invoice generation, reminders, payments, and reporting and lets you manage these functions in one place. Here’s how Stripe can make invoicing easier and more efficient:
Quick invoice creation
Stripe lets businesses generate and send invoices in minutes. Through the Stripe Dashboard, you can:
Add customer details and invoice items
Automatically calculate and apply GST
Customise invoices with your branding and payment terms
Send invoices instantly via email or share a direct payment link
Automatic delivery and payment reminders
Often, the reason for a late payment is that a client forgot to pay. Stripe helps businesses stay ahead of this by automating customisable reminders.
Easy payment options
Businesses that accept online payments via Stripe get paid faster than those relying on manual transfers. For example, Xero users saw payments arrive 14 days sooner on average after integrating Stripe. Stripe invoices come with built-in payment links, so customers can click and pay instantly using the payment method of their choice, including:
Credit and debit cards
Bank transfers
Digital wallets
Bulk Electronic Clearing System (BECS) Direct Debits
Billing for recurring invoices
Stripe Billing is geared towards businesses that bill clients regularly, such as agencies, consultants, or software-as-a-service (SaaS) businesses. It’s particularly useful for retainer agreements, instalment payments, and subscriptions, which reduce the need for constant follow-ups.
Built-in tracking and reconciliation
With Stripe, you can track in real time which invoices are paid, pending, or overdue. You can also automatically mark invoices as paid in your Stripe Dashboard and your accounting software (Stripe integrates with Xero, QuickBooks, and more).
To get started with Stripe Invoicing:
Enable Invoicing in the Stripe Dashboard.
Customise your invoice template – add your logo, GST details, and payment terms.
Set up your first invoice – enter the customer’s details, line items, and due date.
Set up payment methods (e.g. credit card, bank transfer).
Start sending invoices and payment links.
The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.