Invoicing and Tax regulation in Australia

Australia initiated the modernization of its transaction processes in 2022 by mandating e-invoicing for all commonwealth agencies. This shift towards digitalization has been successful and is poised to expand to include mandatory B2B e-invoicing. Although a specific date for this requirement has not yet been set, B2B companies are already permitted to require their trading partners to send e-invoices. Despite the gradual nature of this transition, many companies have opted to adopt e-invoicing early, recognizing significant savings in terms of money, time, and a reduction in manual errors, which are prevalent in tax reporting. With Australia’s standard GST rate at 10% and the corporate tax rate at 30%, minimizing errors is essential to avoid increased financial liabilities and penalties.

 

To ensure you're meeting the requirements while optimizing your financial strategy, explore our comprehensive guide on (e-)invoicing, tax regulations, and digital reporting in Australia.

 

Invoicing Regulations in Australia

Invoicing regulations in Australia are overseen by the Australian Taxation Office (ATO). Invoices are required whenever goods or services are sold, whether the transactions are with other businesses or consumers. For businesses registered for GST, invoices must be issued to the customer within 28 days of the sale, or sooner if requested by the customer. For all taxable sales exceeding AUD 82.50 (including GST), a tax invoice must be issued, clearly stating the GST amount or indicating that the total cost includes GST. For sales below this amount, a tax invoice is not mandatory, but customers may still request one. Proper invoicing practices as per Australian law are crucial to ensure compliance with legal and tax obligations.

The invoice needs to include:

Date of Issue;

Unique Invoice Number;

Supplier Information: Business or trading name and Australian Business Number (ABN);

Customer Information: business name, and encouraged to have Australian Business Number (ABN) of the customer;

Description of Goods or Services,

Quantities and Unit Prices: The quantity and price per unit,

Total amount and GST Details: Total amount payable, a breakdown of the GST amount for each item applicable, amount of GST charged, or a statement that the GST is included if the exact amount isn’t separately shown.

The statement “Tax Invoice”;

A valid tax invoice for GST purposes must contain all the necessary information as per the requirements set out by the taxation authority, including specific details that allow both the supplier and the purchaser to ascertain the GST amount for each transaction.

 

B2C Invoicing Specifications

For most B2C transactions you can issue simplified invoices, which require less information compared to full invoices.

 

Simplified Invoices

A simplified invoice is usually an option, if the transaction is below AUD 1,000. A simplified invoice has to include:

Identity of the Supplier,

Australian Business Number (ABN),

Date of Issue,

Description of the Goods or Services,

GST Amount: the total GST payable either as a single figure or as a statement that GST is included at a specified rate.

 

Invoices Archiving

You have to archive invoices for a period of 5 years, starting from the date they are prepared, obtained, or the transactions are completed, whichever occurs last.

 

 

E-invoicing Regulations

Electronic invoicing, or e-invoicing, is the digital exchange of invoice information between a supplier and a buyer. The ability to send invoices electronically simplifies the billing process, allowing businesses to send invoices directly to customers' accounting systems via a mobile app or web browser, efficiently marking invoices as sent or voiding them as necessary. The shift from paper invoices to e-invoicing highlights the inefficiencies of the former, such as delayed processing times and higher costs, and underscores the benefits of e-invoicing, including improved efficiency, faster payments, and compliance with tax authority regulations. This process not only streamlines operations but also significantly reduces the time spent on manual invoicing tasks.

In 2022, Australia mandated B2G e-invoicing for all commonwealth agencies. While B2B e-invoicing is not yet compulsory, companies are permitted to require their trading partners to send e-invoices. Since July 2023, Australian businesses with an annual turnover exceeding AUD 50 million have the authority to mandate e-invoicing from their larger trading partners. This requirement will expand in July 2024 to include medium-sized businesses with turnovers between AUD 10 million and 50 million. By July 2025, all businesses, regardless of size, will be expected to adopt e-invoicing if required by their trading partners.

Australia has adopted the Peppol standards for e-invoicing, managed by the Australian Taxation Office (ATO). Unlike systems that rely on a centralized platform, Australian businesses connect to the Peppol network through accredited Peppol Access Points. These access points are service providers authorized by the ATO, capable of both sending and receiving e-invoices.

 

E-invoicing Process

Taxpayers in Australia must register on the Australian Taxation Office's (ATO) online services portal. This platform enables them to handle various tax-related activities, including the submission of electronic documents. The process includes:

Completing a transaction: Australian taxpayers are generally required to submit details electronically after the delivery of goods or services.

Upon submission: The ATO reviews the electronic document. This review involves verifying the transaction details and assigning a unique identification code known as the TIN (Tax Invoice Number).

After validation: the taxpayer issues a receipt that includes the TIN and potentially other security features like a QR code.

The customer receives this receipt: which includes the TIN and any additional security features.

Customers or other interested parties can verify the transaction: through a web application provided by the Australian Taxation Office.

 

Governmental Body Responsible for E-invoicing

The governmental body responsible for e-invoicing in Australia is Australian Taxation Office (ATO).

 

E-invoicing Formats

Australian e-invoicing formats align with the international standard PEPPOL. The system for e-invoicing is managed through the Australian Taxation Office (ATO).

E-invoicing formats commonly used in Australia:

UBL (Universal Business Language)	Internationally recognized standard that includes a suite of XML-based business documents specifications.
PEPPOL BIS Billing 3.0	Internationally recognized standard, providing a unified XML-based specification for electronic billing.
AU e-Invoice	Adapted framework within the PEPPOL network that includes XML-based specifications tailored for electronic invoicing processes in Australia.

 

E-invoices Validating

Ensure that your e-invoices adhere to both Peppol standards and specific Australian requirements. The validation of e-invoices is automatically managed through registered Peppol Access Points, eliminating the need for additional validation or digital certificates for the sender, streamlining the e-invoicing procedure.

 

E-invoice Archiving

In Australia, you must archive e-invoices for a minimum period of 5 years. The archiving period starts from the date the documents were prepared, or the transactions completed, whichever is later. Archiving abroad is allowed under certain conditions.

 

 

Tax Regulations

The Goods and Services Tax (GST) rate in Australia is 10%. Unlike some other countries, Australia does not employ multiple or reduced GST rates for different categories of goods and services. However, there are exceptions with some items being GST-free, such as basic foodstuffs, certain medical and healthcare services, educational services, and exports.

Any transaction where GST is applicable refers as a taxable sale and businesses must account for this in their pricing and GST calculations, including the rounding of GST amounts for these sales.

 

Corporate Tax

The standard corporate tax rate in Australia is 30%. There is a reduced rate of 25%, which applies to companies with an annual turnover of AUD 50 million or less.

 

GST on Digital Products

In Australia, the Goods and Services Tax (GST) applies to digital services and products such as software, digital music, e-books, and streaming services, at the standard rate of 10%. This GST rate applies regardless of whether the supplier is located within Australia or overseas.

 

 

GST Payments and Returns

Businesses must file a Business Activity Statement (BAS) to report their GST amounts collected and paid. The BAS includes:

GST collected on sales,

GST credits for GST paid on business purchases.

The difference between GST collected on sales and GST credits on purchases is the net amount of GST shown on the BAS and must be paid to the Australian Taxation Office (ATO). If the GST credits exceed the GST collected, the business can claim a refund.

The reporting frequencies are:

Monthly: Reports must be submitted by the 21st day of the month following the reporting period. Mandatory for businesses with a turnover of AUD 20 million or more.

Quarterly: Reports must be submitted by the 28th day of the month following the quarter's end. Mandatory for businesses with a turnover below AUD 20 million.

Annually: Reports must be submitted by the 28th day of February of the year following the tax period.

 

The Australian Taxation Office (ATO) encourages the electronic filing of Business Activity Statements (BAS) and payments through its online portal (ATO Online).

 

GST Registration Threshold

The GST registration threshold for domestically established businesses in Australia is AUD 75,000. Non-profit organizations, however, must register for GST if their annual turnover reaches or exceeds AUD 150,000.

Non-residents and non-Australia-based suppliers are required to register for GST if they are conducting a business or enterprise in Australia, and if their GST turnover from sales associated with Australia equals or exceeds AUD 75,000.

 

 

E-invoice Requirements

In Australia, e-invoice requirements adhere to Peppol standards and are demanding components such as:

Supplier Information: Name and address, ABN and contact information;

Customer Information: Name and address, ABN or ACN (Australian Company Number) if applicable and contact information;

Date of Issue;

Unique Invoice Number;

Due date for payment;

Banking and Payment Information; including the option to accept credit card payments,

Description of Goods or Services,

Quantities and Unit Prices: The quantity and price per unit,

Total amount and Tax Details: Breakdown of taxes applicable, typically GST; total taxable amount and tax rate applied; total amount payable, excluding GST; grand total, including GST;

Additional Information: reference numbers, discounts or adjustments;

Legal and Regulatory Information: statements required by law, such as privacy or retention policies, declaration of the authenticity of the contents.

For businesses with repeating customers, setting up recurring invoices can streamline the billing process by automating regular, automatic payments.

 

Utilizing invoicing software can significantly benefit businesses in creating, sending, and managing e-invoices in compliance with Australian regulations. These tools not only help in generating professional invoices but also in streamlining the invoicing process, improving cash flow, and ensuring that payments are received on time.

See how Space Invoices can help.

 

B2C E-invoice Specifications

For most B2C transactions you can issue simplified e-invoices, which require less information compared to full invoices.

 

Simplified E-invoice Requirements

Simplified e-invoices include:

Supplier’s name and ABN,

Invoice date,

Description of the goods or services,

Total amount payable: with taxes such as GST combined into a single total;

Payment information.

 

 

Digital Reporting R

Businesses registered for GST in Australia are required to lodge a Business Activity Statement (BAS) electronically. This can be done through the Australian Taxation Office (ATO) online services, via business software that supports this feature, or through a tax agent. The BAS includes details on GST collected and paid, payroll transactions, and other tax-related information.

It is recommended that businesses maintain electronic records of all transactions, ensuring compliance with ATO standards. These records are crucial for audit purposes and must be retained for a minimum of five years.

 

SAF-T

SAF-T is not yet mandatory in Australia.

 

Real-Time Reporting

While real-time transaction reporting is not universally mandated across all sectors, there are specific regulations that apply to certain industries:

Banks and financial institutions are required to report large transactions in real time,

Transactions in the stock market.

 

Single Touch Payroll

Single Touch Payroll (STP) is a digital reporting system in Australia, where employers are required to send payroll information to the Australian Taxation Office (ATO). This information includes salaries and wages, pay as you go (PAYG) withholding, and superannuation details. Employers must use STP-compliant software to transmit this data to the ATO simultaneously with their payroll processing.

 

Data Breaches

If a data breach occurs in Australia, you are required to conduct an assessment within 30 days to determine whether the breach is likely to result in serious harm to any individuals affected. Should the breach be assessed as posing a significant risk of serious harm, you must notify both the Office of the Australian Information Commissioner (OAIC) and the affected individuals as soon as practicable. The notifications must include recommendations regarding steps the individuals should take in response to the breach.

 

 

Penalties

If a business registers for VAT later than required, penalties vary based on the delay in registration. For registrations up to 9 months late, the penalty is typically 5% of the net GST due. This increases to 10% for registrations delayed by 9 to 18 months, and rises to 15% for registrations more than 18 months late.

For GST payments that are 16-30 days late, a penalty of 2% of the GST due may be imposed. If the payment is delayed by more than 30 days, the initial 2% penalty applies, along with an additional 2% on the remaining amount. Additionally, a daily interest penalty of 4% per year on the outstanding balance may be charged until the payment is fully made.

 

Data Breaching Penalties

Under the Consumer Data Right (CDR) in Australia, penalties for data breaches have been significantly increased. For serious or repeated breaches of privacy, the maximum penalty is now the greater of $10 million, three times the value of any benefit obtained through the misuse of information, or 10% of the entity’s annual Australian turnover.

 

 

Streamline Global Invoicing and Digital Reporting with Space Invoices

One way to comply with (e-)invoicing, tax and reporting regulations in Australia is to use an API provider like Space Invoices.

You will be able to:

Have one API for current and future worldwide compliance, including Australia

Support and upsell your clients worldwide, including Australia

Become the one-stop shop for current and future clients

Save time and money streamlining the process and eliminate manual errors

Rest assured all documents are archived and successfully reported to responsible institutions

Save time and money with less than a week-long integration

 

Having questions how to achieve compliance in Australia?

We are ready to help.

 

 

Space Invoices does not provide professional tax opinions or tax management advice specific to the facts and circumstances of your business and that your use of the Specification, Site, and In addition, due to rapidly changing tax rates and regulations that require interpretation by your qualified tax professionals, you bear full responsibility to determine the applicability of the output generated by the Specification and Services and to confirm its accuracy. No professional tax opinion and advice.

Looking to automate real-time reporting and tax compliance for Australia? Let's talk