How to Invoice as a Sole Trader in Australia
What a valid sole trader invoice must include, the difference between a regular invoice and a tax invoice, the no-ABN withholding rule, and how to get paid faster.
By Timothy Hirou GaschereauPublished 10 min read
Invoicing sounds simple until you realise there are two completely different types of invoice in Australia, a withholding rule that can cost you nearly half your payment, and record-keeping obligations most new sole traders have never heard of. Get these right and you look professional and get paid faster; get them wrong and you leave money on the table.
Here is the full, plain-English guide, with a checklist you can run before you send every invoice.
🎯 The essential: If you are not registered for GST, issue a regular "Invoice", do not charge GST, and do not use the words "Tax invoice". If you are registered for GST (compulsory once turnover hits $75,000), you must issue a "Tax invoice" showing 10% GST separately. Either way, always put your ABN on it: leave it off and the payer is legally required to withhold 47% of the payment. Include your name, the date, a clear description, the buyer's identity for invoices of $1,000 or more, and a total, and keep every invoice for five years.
Regular invoice vs tax invoice: the crucial split
This is the most important thing to get right, and it depends entirely on whether you are registered for GST. If you are not registered, issue a regular invoice, do not charge GST (you have not collected it), and do not write "Tax invoice" anywhere (it is misleading and non-compliant). A short note like "No GST has been charged as [name] is not registered for GST" saves your clients asking. If you areregistered, you must issue a tax invoice: the words "Tax invoice" appear prominently, you add 10% GST, and you show the GST amount clearly so your client can claim their credit. You must register once your annual turnover reaches $75,000 ($150,000 for non-profits); below that it is optional. Our BAS guide covers what comes after you register.
What every invoice must include
Here is the anatomy of a compliant tax invoice, with the field that trips people up highlighted:
| Field | Regular invoice | Tax invoice |
|---|---|---|
| Words "Tax invoice" | No (use 'Invoice') | Required |
| Your name and ABN | Required | Required |
| Buyer's identity ($1,000+) | Required | Required |
| Date and description | Required | Required |
| Quantity and unit price | Required | Required |
| GST shown separately | Not applicable | Required |
| Total payable | Required | Required |
The no-ABN withholding rule: why your ABN matters
Here is the rule that catches new sole traders off guard. If you do not quote your ABN on an invoice, the payer is legally required to withhold 47% of the payment (over $75 excluding GST) and send it to the ATO. They are not being difficult; they face penalties if they do not. You can reclaim the withheld amount at tax time, but that could mean waiting months for money that should have landed immediately, a serious cash-flow problem.
The fix is simple: always include your ABN on every invoice. If you do not have one, it is free to apply through the Australian Business Register, and if yours was cancelled while you were quiet, see how to reactivate a cancelled ABN.
Numbering and payment terms
Invoice numbers are not legally required, but a sequential system (INV-001, INV-002, or INV-2026-001) creates a clean audit trail and looks professional. Never reuse a number. On payment terms, there is no legal default, so state yours clearly: net 7, net 14 or net 30 are common, but rather than writing "Net 30" (which clients misread or ignore), write the actual due date, "Payment due 25 September 2026", which is much harder to overlook. For large projects, asking 25 to 50% upfront is standard and filters out clients who were never serious.
Getting paid faster
- Send the invoice immediately, ideally the day the work is delivered. Every day you wait adds a day to payment.
- Make paying easy: list your BSB and account number, PayID, and a card link if you accept one.
- Follow up before the due date with a friendly reminder; most late payments are just forgotten, not malicious.
- Follow up on the due date with a polite, direct email if it is still unpaid.
- Escalate if needed: a formal letter of demand, then a debt collector or your state's small claims tribunal (VCAT, NCAT, QCAT, SACAT), which are built to be used without a lawyer.
Record-keeping: the 5-year rule
The ATO requires you to keep records of all business transactions, including every invoice issued and received, for at least 5 years, starting from when the record was prepared or the transaction completed, whichever is later. Digital is strongly preferred: easier to search, harder to lose. Keep sales invoices, purchase receipts, bank statements and any contracts. Cloud accounting software stores it all automatically, which makes the five-year rule effortless. This ties directly into your drawings and tax set-aside habits.
Tools and templates
You do not need expensive software to issue a compliant invoice. A free Word, Google Docs or Canva template is perfectly valid as long as it has the required fields. Once you are busy or GST-registered, accounting software earns its keep: it auto-numbers invoices, calculates GST, sends reminders, stores records for the five-year rule, and generates BAS reports. Popular Australian options include Rounded and Hnry (both built for sole traders and freelancers), plus Xero, MYOB and QuickBooks. Pick one, keep your numbering consistent, and let it do the admin.
Frequently asked questions
Do I need to register for GST as a sole trader?
+
Only if your annual GST turnover is $75,000 or more ($150,000 for non-profits). Below that, registration is optional, though some register voluntarily. Once registered you must charge GST on your supplies, issue tax invoices, and lodge a BAS regularly.
What happens if I forget to include my ABN on an invoice?
+
The payer is legally required to withhold 47% of the payment and send it to the ATO under the no-ABN withholding rule (for payments over $75 excluding GST). You can reclaim it at tax time, but that could mean waiting months for money that should have been in your account. The fix is simple: always include your ABN.
What is the difference between an invoice and a tax invoice?
+
A regular invoice is issued by a sole trader who is not registered for GST. A tax invoice is issued by one who is. A tax invoice must show the words 'Tax invoice' prominently and display the GST amount separately (or state that the total includes GST). Using 'Tax invoice' when you are not GST-registered is non-compliant.
Do I need to include the buyer's ABN on my invoice?
+
For invoices of $1,000 or more (including GST) you must identify the buyer, usually with their business name, though their ABN also works. Under $1,000 the buyer's ABN is not required, but including their name is still good practice.
How long do I need to keep copies of my invoices?
+
The ATO requires you to keep records of all business transactions, including invoices, for at least 5 years, starting from when the record was prepared or the transaction completed, whichever is later. Digital copies are fine, and cloud accounting software makes this essentially automatic.
Can I use a free template instead of accounting software?
+
Yes. A free Word, Google Docs or Canva template is perfectly valid as long as it has all the required fields. Accounting software just makes it faster, calculates GST for you, sends reminders, and stores records, which is worth it once you are GST-registered or sending more than a handful of invoices a month.
What should I do if a client does not pay?
+
Start with a polite reminder a few days before the due date, then a firm follow-up if it passes. For persistent non-payers, send a formal letter of demand, and if that fails you can use a debt collection agency or your state's small claims tribunal (VCAT, NCAT, QCAT, SACAT and equivalents), which are built to handle this without a lawyer.
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Sources
- ATO, tax invoices
- ATO, withholding if an ABN is not quoted
- ATO, record-keeping for business
- business.gov.au, payments and invoicing
General information only, not financial, legal or tax advice. It does not take your circumstances into account. GST and invoicing rules can change, so verify current requirements with the ATO or a registered tax agent before acting.
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General information only. This article is educational and does not constitute personal financial advice. It does not account for your circumstances. Consider your own situation and seek advice from a licensed adviser before acting. Read our full disclaimer.
Timothy Hirou Gaschereau
Founder of Snowball Invest, not a financial adviser.
I write about what I'm learning myself, because nobody ever taught us how to take control of our own money. It's a skill, not a mystery, and it's never too late to learn it. The best day to start was yesterday, the second best is today.
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