How To Invoice As a Sole Trader in Australia

Foreigners often joke about Australia being the “upside-down” country, where everything’s turned on its head. And while this benign joke mostly refers to the continent’s geographical location and murderous wildlife, it’s also relevant to Australia’s laws regarding self-employment and invoicing.

So, to help you make sense of it all, in this article, we’ll cover everything you need to know about becoming a “sole trader” in Australia and what that means for your invoicing processes.  

Key Takeaways

• A sole trader invoice in Australia must include specific details like ABN, contact information, and a clear description of the services or goods provided.
• Utilizing an invoice template designed for sole traders can streamline the billing process, ensuring all necessary legal and financial information is included.
• Knowing how to invoice as a sole trader in Australia involves understanding the tax implications, such as GST, and accurately incorporating them into invoices.
• Efficiently managing sole trader invoices means keeping thorough records for tax and business performance tracking purposes.
• Personalizing your sole trader invoice template can enhance your professional image and help establish stronger relationships with clients.

What Is a Sole Trader?

To put it simply, the sole trader definition is a self-employed person who runs their own business. That means that in the eye of Australia’s law, you and your business are one and the same. 

In other words, you have full control over your company, its assets, profits, and taxes. However, you’re also personally responsible for your business’ conduct and any damage it may cause to your wealth. This is called sole trader public liability. 

Clearly, there are both advantages and disadvantages to becoming a sole trader. However, you must consider several things before deciding whether to register as one. And the easiest way to do that is to compare the setup against other structures. 

Sole Trader Vs. Limited Company: What’s The Difference?

Whenever an Australian decides to kick-start their self-employment journey, they tend to choose between becoming a sole trader or starting a limited company. Here’s what you need to know about both before you make a decision.

Types of Business Structure

Of course, limited companies aren’t the only alternatives to being a sole trader – just the most popular. Below, you’ll find a comparison of all the other options you have open to you.

Why Do Sole Traders Prepare Professional Invoices?

Invoices are legally binding documents expressing the receiver’s obligation to pay for products and services delivered in a specific timeframe. As such, they’re a vital part of life for a business owner. After all, they’re how you get paid.

However, not all invoices are made equal. Sole traders should put effort into crafting professional invoices as they provide a number of palpable benefits. These include:

• Clear structure and legibility prevent misunderstandings and help ensure you get paid on time.
• Professional branding helps reinforce brand recognition and improves your trustworthiness and professional reputation. 
• Included Terms of Service promote successful invoice fulfillment and can help you win potential lawsuits. 
  

What To Include On a Sole Trader Invoice?

You need to include several invoice elements on your sole trader invoice to be professional and legally binding. We’ll discuss these in more detail in a later section, so for now, here is just everything you should keep in mind while creating your invoice in Word or Excel.

• The word “Invoice” and an invoice number corresponding to the deal.
• The issue, delivery, and due date of the invoice.
• Your business details, including ABN, company name, and contact details.
• The client’s information, including name, address, and contact details.
• The list of items, along with quantities and descriptions.
• Partial and total price.
• Tax, if applicable.
• Payment terms and bank details.

How Do I Write a Sole Trader Invoice?

Generally speaking, there are 5 ways how to invoice as a sole trader in Australia. You can read all about them in our article How to Create an Invoice for Free, but to be specific, these include:

1. Standard Document Creators (Word, Docs, Excel, etc.)
2. Customizable Online Templates
3. Specialized Invoice Generator
4. Accounting Software
5. Manual Creation

Regardless of how you decide to create your sole trader invoice, the process remains largely the same. To create a professional invoice, you have to:

1. Identify the Document: To avoid confusion and make tracking easier, every document you create should have a name and an ID.
   Name: This can be specific to the client or deal, but usually, it’s enough to identify the type of document you’re creating (i.e., Invoice).
   ID/Number: This unique number determines when (or in what order) a document was issued, like “#0001”. We’ll discuss how to assign an invoice number in the next section.
2. Add Company Information: For an invoice to be legally binding, it must include both your and the client’s company information.
   This includes the name, physical address, business ID, and contact person, and it helps ensure it reaches the correct recipient.
3. Add Products & Descriptions: To prove you’ve fulfilled your end of the deal, your invoice has to detail all the products and services supplied, along with their amounts and descriptions.
4. Specify Relevant Dates: Invoices are time-sensitive documents, so they should include several dates to help avoid confusion, late payments, and subsequent potential lawsuits. These include:
   Issue Date: Details when the invoice was created and sent to the customer.
   Delivery Date: Specifies when the products/services identified in the invoice were delivered.
   Payment Date: Set a clear deadline until the customer has to pay you. If they fail to do so, you can charge them late payment fees or potentially take them to court.
5. Include Pricing: You have to specify how much the customer owes you so that you can get paid. There are two types of prices you should include on your invoice.
   Item Price: Specific to each product or service supplied. You can also add a “per unit” price if the client ordered several units of the same thing.
   Total Price: Add all the partial item prices described in the invoice into one.
6. Detail the Payment Terms: The terms of every business deal must be clearly defined to be legal. This includes when and how a customer should pay your invoice. 

Usually, you’ll cover these with your client before accepting an order, but you should include payment terms on your invoices to ensure the payment process goes through smoothly. 

For more inspiration, explore the most popular types of invoices with our specialized invoice maker at Billdu!

Taking a Closer Look at Business Details

Make no mistake – everything you put on your invoice is important. But your and the customer’s business details even more so. After all, they’re directly responsible for ensuring the document reaches the right person and payment goes without a hitch.

And that’s why we decided to take a closer look at them here. There are 4 specific pieces of information that belong to this category. They include:

1. Business Name: It should be the first thing a customer sees when they look at your sole trader invoice, as it helps quickly reassure them that they’re looking at the correct document.
   Therefore, it’s good practice to make your business name bold and slightly larger in size when compared to the rest of the information, as it’ll help it stand out. You can further supplement this effect with a company logo in the corner.
2. Address: This was particularly important back when most business documents used to be delivered by post. Nowadays, when email is the go-to solution, shipping is not as big of an issue.
   Nevertheless, the business address still has an important role to play – particularly in combating wire fraud and impersonation- by allowing card issuers and other organizations to double-check whether it’s really you.
   So, if your billing address is different from your shipping address, be sure to make that clear to both your customers and anyone else you come into contact with in a professional capacity.
3. Contact Details: Often, the person you negotiated and closed a deal with won’t be the same one to handle your payment – especially when you do business with larger corporations.
   That means that if any problems come up with your invoice or the payment process, your customers may have a hard time getting your contact. This is exactly why your email and phone number should be included on your invoice.
4. Invoice Number: When tax season rolls around, it’s best to have your invoices in order – literally. Invoice numbers let you quickly identify when and potentially to whom you issued based on the structure you choose.
   So, not only are invoice numbers a mandatory part of your documents, but they also help you and your customers keep clear records, should you ever need them. 
   

Setting and Adding Your Payment Terms

Equally as important are your payment terms, as they help clear up acceptable forms of payment, protect you from late-payers with fees, and overall, just make any deal that much easier to navigate. You can learn more about this here.

You can decide to set up general payment terms for everyone or create individual ones for each customer. The choice is yours! But regardless of how you approach payment terms, you should always include them on your invoices.

Some of the payment terms you might want to consider include:

• 15 MFI: Abbreviation for “Month Following invoice” means you expect the customer to pay their dues by the 15th of the month following the invoice issue date.
  
• Cash Account – Letter of Credit: You expect the customer to make their payments in cash but will accept credit confirmed by a bank.
  
• COD: Abbreviation for “Cash on Delivery” means that the customer only has to pay after receiving the promised products/services. In this case, the risk is on the provider’s side. If something goes wrong, the customer may decide not to pay.
  
• CONTRA: Also known as a “Contra Payment”, is used when two companies that owe each other do business. A portion of the payment is provided for by services/products, and the remainder is paid.
  
• Net 30: You expect the customer to pay 30 days after the invoice date.
  
• PIA: Abbreviation for “Payment in Advance” means you expect the customer to pay their dues upfront before you start working on the project / deliver the products.
  
• 50% Upfront: You expect the customer to pay 50% of the total price upfront before you start working. It’s very common for long-term projects.
• Stage Payment: Also known as “Process Payment”, this is used for long-term projects. Payments are scheduled ahead of time according to milestones specified and are only paid after each is met and confirmed. It’s also common for penalties to be applied if milestone delivery dates are delayed. 
  

Why Are Bank Details Needed on an Invoice?

Sole traders often include bank details on their invoices because bank transfers are the most common payment method, and including this information directly on the document saves a lot of time on back-and-forth. That’s why you should include:

• Full Bank Name
• Account Name
• Account Number
• Invoice Reference Number / Variable Symbol

This will not only help your clients pay you more easily, but you’ll also be able to immediately tell which payment came from who. 

How to Create a Professional Invoice as a Sole Trader in Australia

The easiest way of how to invoice as a sole trader in Australia is to use an invoicing software like Billdu. It’s a fully online solution that lets you create, issue, and track all your financial documents (invoices, estimates, and more) in one place. 

But that’s not where the story ends. You can easily create professional documents thanks to our customizable editor, which lets you choose a invoice template for self-employed people, add logos, change colors, and more!

Furthermore, Billdu empowers you to focus on what you do best as a sole trader and save time on all the rest. After registering a customer, you can auto-fill their information into future invoices or even invite an accountant to do it for you.

You can also set up card payments to streamline the payment process and see your document status at a glance in your overview tab, including pending, paid, and late invoices. And all that for 30 days, completely free!

Invoice Requirements for Non-GST Sole Traders in Australia

Of course, like all other countries, Australia has its own set of laws and unique requirements for invoicing. These divide sole traders into two types: ones that are required to pay the GST and the ones that aren’t.

If you’re not required to pay the GST, your invoice has to legally include:

• Your ABN
• Your business name and contact details
• A unique invoice number 
• The date you issue the invoice
• An itemized list of services sold, specifying quantity and price
• Your payment conditions and details
• Your client’s details

What Is Legally Required on a GST Invoice in Australia?

If you have to pay the GST, your invoice has to include several additional pieces of information. These include:

• The words “Tax Invoice”.
• The GST amount to be paid on your services
• The extent to which each item sold includes GST, displayed either individually for each item or by clearly stating the total price includes GST.
  

What Is the GST Tax Invoice Format?

The GST can be an abbreviation for the Goods and Services Tax, or Global Sales Tax. Regardless of which formulation you prefer, both mean the same thing. 

Sole traders and companies can voluntarily register for the GST with the Australian Taxation Office (ATO), but there are several entities that have to. If you’re wondering if you’re one of them, here are the requirements:

• Have an annual turnover over $75,000 as a sole trader/company, or over $150,000 as a non-profit organization.
• Be a taxi/rideshare driver or business owner.
• Sell or purchase property/products subject to GST.
• Be a foreign entity selling imports in the Australian market.

Some examples of property, goods, and services subject to GST include:

1. Goods:

• Consumer goods such as electronics, clothing, and household items.
• Commercial goods traded between businesses.
• Imported goods valued at A$1,000 or less (including services and digital products).

2. Services:

• Professional services such as consulting, legal, and accounting services.
• Health and medical services provided by practitioners.
• Entertainment services such as ticket sales for events, movies, and concerts.
• Hospitality services including accommodation, meals, and catering.
• Transport services such as taxi rides, rideshare services, and freight services.

3. Property:

• Sale and lease of commercial properties.
• Sale and lease of residential properties (unless exempt).
• Sale of land (excluding farmland and residential property sales by individuals).
• Sale and lease of new residential premises (including apartments and houses).

It’s important to note that certain transactions or types of property may be exempt from GST, such as basic food items, certain medical and health services, and certain financial services.

Additionally, some transactions may be subject to special rules or concessions, so it’s advisable to consult with the ATO or a qualified tax advisor for specific guidance.

It’s essential for businesses that meet these criteria to register for GST with the ATO within 21 days of reaching the threshold.

What Is ABN and Do I Need It?

The Australian Business Number (ABN) is a unique 11-digit identifier (ex. 98765432109) issued by the Australian Taxation Office to entities conducting business in Australia. 

It serves as a single identifier for dealings with the Australian Government and is used for various tax and business-related purposes. But the question is…

Can I invoice without an ABN?

Yes, actually you can. Technically, there is no law that makes getting an ABN mandatory, if you’re just running a small operation or side-hustle. However, most sole traders in Australia get an ABN anyway. Here are the reasons why:

1. Business Activities: If you’re engaged in any form of business, trade, or commercial activity, you likely need an ABN. This includes selling goods or services, freelancing, or providing professional services.
2. Turnover Threshold: Even if your business has not yet reached the $75,000 turnover threshold for GST registration, you may still need an ABN. It’s important to note that having an ABN does not automatically register you for GST; you must register separately if you meet the GST turnover threshold.
3. Interaction with Other Businesses: Many businesses, particularly larger ones, may require you to have an ABN before they engage in transactions with you. This is because they have obligations to verify the ABNs of their suppliers.
4. Tax Obligations: Having an ABN enables you to streamline your tax affairs, including claiming business-related expenses and credits, issuing invoices, and lodging Business Activity Statements (BAS).

Common Invoicing Mistakes Made By Australian Sole Traders

Invoicing mistakes are common when you’re first starting your journey as a sole trader and that’s nothing to be ashamed of – we all have to start somewhere. However, you have the advantage of learning from the mistakes that came before you.

If you want to invoice like a pro, you SHOULD NOT:

• Send Invoices: With so much information to worry about, it’s can be easy to forget including a due date or other payment information. However, this’ll only lead to misunderstandings and delays. Always double and triple-check your invoices before you send them.
  

• Make It Difficult to Pay You: It’s one thing to not specify your preferred payment method, but it’s another to be overly restrictive. If you want to get paid on time, it’s best to give your customers multiple choices, including paying by card, bank transfer, cash, or other.
  

• Wait Too Long to Send Your Invoice: People like to forget, especially when they’re supposed to pay something. If you keep your customers waiting for an invoice for too long, the odds of you getting your money fall significantly. So, it’s always best to invoice as soon as project is done.
  

• Not Follow Up with Late Payers: Let’s say you made the previous mistake and now you’re missing money on your account. Don’t wait for the situation to resolve itself. Send emails, make calls, and if push comes to shove, don’t hesitate to leverage late fees and lawsuits.
  

• Go Overboard on the Design: As we’ve discussed throughout the article, the goal of a professional invoice is to be as legible and comprehensible as possible. So it’s best to avoid gaunty lettering and keep design flourishes to a tasteful minimum to not distract from the most important information.

Free Invoice Template for Sole Traders

Want to create professional invoices that follow the do’s and dont’s of sole trader invoicing, but don’t want to commit to a software subscription just yet? In that case, try Billdu’s free invoice template for self-employed in Australia!

You can use online templates to create invoices and other business documents anytime and anywhere directly on your favorite smart device (laptop, tablet, smartphone, etc.). Our templates are made with the mobile environment in mind, meaning you can comfortably use them on a screen of any size. 

Australian invoice templates come with a variety of design options, letting you choose the color scheme and layout that fits you the best. On top of that, they’re fully customizable, so you can reinforce your branding with logos, legally protect yourself by adding payment terms, and more. 

However, that’s not to say you have to do everything by yourself, as you would in Excel, Word, or Google Sheets. Billdu’s online invoice templates offer a fair degree of automation, including automatically adding up price subtotals and totals and filling in invoice numbers – all to save you some time and trouble. 

And speaking of saving time, if you decide to use customizable online templates to create your invoices, remember to add your banking details at the bottom of your template, so you can get paid faster. 

Why You Should Use Online Invoicing

Nowadays, everyone can enjoy the convenience and efficiency of digital invoicing, but it wasn’t always like this. For years, businesses had to rely on paper-based solutions – designing, printing, shipping, and storing invoices for all their deals. 

Unsurprisingly, this was quite costly for both the environment and the businesses themselves. 

So, why don’t we take a moment to appreciate the value digital invoicing has brought us and perhaps convince those who still hold onto the old way of doing things?

The benefits of digital invoicing include:

• Lower Costs: At first glance, it may not seem like it, but paper-based invoicing carries a significant price tag. The piles of papers, printers, ink cartridges, and postage costs all eat into your bottom line.
  Meanwhile, digital invoices are essentially free outside of your devices, internet connection, electricity bill, and possibly invoicing software subscription. As a sole trader, you never have enough extra resources.
  So, why not spend your hard-earned money on something your business needs?
  

• Time-Saving: As explained above, a lot goes into keeping paper-based invoicing on track. Designing, printing, and handling all take a lot of time, which your employees could spend more efficiently doing something else.
  On the other hand, generating and sending a digital invoice only takes a few clicks. Give yourself the room to do better, maximize your efficiency, and spend the extra time on tasks that actually require it.
  

• Streamlined Operations: Making a factual mistake or losing an invoice used to be costly mistakes. But with a central invoicing system, you can make edits and recover business documents in moments, saving face in front of customers and money on fines.
  

• Easier Bookkeeping: Invoices give vital insights into your company’s financial health, allowing you to benchmark performance, file taxes accurately, and more.
  Unfortunately, back in the day, this benefit was held back significantly by the time and effort it took to browse through all your folders and papers.
  Nowadays, you can enjoy it in full thanks to digital invoicing. Cloud solutions like Billdu let you save all your invoices and other business documents online and access them anywhere, anytime, from any of your smart devices.
  Alternatively, you can invite your accountant to manage your business documents and finances remotely and never worry about a thing again.
  

• Ecologically-Friendly: As we mentioned, the large scale of paper production and consumption involved in invoicing took a significant toll on the world’s environment in the past. And that’s not good since the world is the thing we live on. 

Digital invoicing eliminates this negative effect almost in its entirety (apart from the associated carbon emissions involved in running offices with electrical devices), letting you do business better and faster while doing your part in prolonging our existence on our planet.

Helpful Tips for Sole Traders

Want to make kick-starting your life as a sole trader as easy as possible? Make sure to follow these helpful tips!

• Register for an ABN.
• Understand your tax obligations.
• Keep accurate records.
• Separate business and personal finances.
• Claim deductions.
• Stay informed on changes in the law.
• Consider insurance coverage.

Conclusion

And that’s it! You’ve learned the ins and outs of invoicing as a self-employed professional in Australia, had the opportunity to compare various business structures, and even gotten acquainted with the do’s and don’t s of professional invoicing.

As you embark on your entrepreneurial journey, we wish you the best of luck! And for a helping hand along the way, don’t hesitate to explore some of Billdu’s innovative features mentioned in the article. Happy invoicing!