A tax invoice is a specific type of invoice showing the amount of tax payable on a transaction. If your business charges tax on goods or services, this amount should be itemised on a tax invoice.
So, how exactly do tax invoices work and what should you include in one? Let’s take a look.
Like a regular business invoice, a tax invoice is a document used to itemise and record a transaction between a supplier and a buyer. What makes a tax invoice different is that it also includes the amount of tax payable as part of the transaction.
For example, let’s say a business needs to create an invoice for $100 worth of goods and services, plus collect 10% goods and services tax. Generally speaking, a tax invoice would show the subtotal without tax ($100), the tax payable (10% or $10) and the combined total ($110).
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Tax invoices are important because they show that a business is legally entitled to collect tax on a transaction.
In many countries, if your business is registered to collect tax, you’ll need to use a tax invoice to be compliant with government tax laws and to ensure your accounting records are accurate for the financial year.
Requirements for tax invoices differ from country to country. That said, some of the most common reasons to use a tax invoice include:
Generally speaking, the main elements to include in a tax invoice are as follows:
The guidelines regarding tax invoices can differ from country to country, so it’s a good idea to check the rules with your local tax authority or a tax advisor.
Here’s an example of a typical tax invoice format:
Tax InvoiceABC Business ABN: 12 345 678 910 123 Main St Anytown AUSTRALIA |
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|
Bill to XYZ Customer 456 Main St Anytown AUSTRALIA |
Invoice number 1234 Date 01/01/2022 Due date 08/01/2022 |
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Description |
Unit price |
Tax |
Total |
|
Item 1 |
$100 |
$10 |
$110 |
|
Item 2 |
$50 |
$5 |
$55 |
|
Item 3 |
$100 |
$10 |
$110 |
|
Item 4 |
$75 |
$7.50 |
$82.50 |
|
Subtotal |
$325 |
||
|
Tax |
$32.50 |
||
|
Total with tax |
$357.50 |
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|
Balance due by 08/01/2022 Payment details: Account name: ABC Company Account number: 1234 5678 |
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Good invoicing processes help to keep your cash flow in check, maintain accurate accounting records and meet your tax obligations. Follow these best-practice tips:
QuickBooks’ invoicing software makes it easy to create professional tax invoices and accept payments in one place.
With QuickBooks invoicing features, you can send custom invoices, automate sending invoices to repeat customers, schedule automatic invoice reminders and streamline your record-keeping. Financial statements update in real-time, immediately reflecting shifts in your accounts receivable and bank account balances.
While every care has been taken to ensure the accuracy of the information presented as at 12 April 2024, Intuit is not providing you with professional advice and we recommend you obtain your own professional advice. Intuit is not liable for your use of the information presented.
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