Quick answer
Contractors in Australia invoice exactly like any other small business — with one critical addition: your ABN must be on every invoice. Skip it and the payer is legally required to withhold 47% of your payment and remit it to the ATO. Charge GST only if your annual turnover is $75k+. Watch the PSI rules if more than half your income comes from your personal labour, and check whether your contracts trigger super obligations for the hirer.
Are you actually a contractor (or really an employee)?
The ATO and Fair Work both apply a multi-factor test to decide whether you’re a genuine contractor. Markers of a contractor:
- You can subcontract or delegate the work
- You’re paid for a result, not hours worked
- You provide your own tools/equipment
- You wear the risk of bad workmanship (rectification at your cost)
- You control how the work is performed
- You can work for multiple clients
If most of these don’t apply — e.g. you sit in a desk at the client’s office, you can’t send someone else, you’re paid by the hour, you’re told what to do daily — the relationship is probably actually employment, regardless of what the contract says. That’s a bigger problem than invoicing.
Step 1 — Get an ABN
Free, online, takes 15 minutes at abr.gov.au. You need one to operate as a business and to put on your invoices.
Without an ABN, the payer must withhold 47% from your payment under the “No-ABN withholding” rule (TFN withholding rate, top marginal). They send the cash to the ATO and you have to claim it back at tax time. Most clients will simply refuse to engage contractors without an ABN.
Read more: how to invoice as a sole trader.
Step 2 — Decide whether to register for GST
Required if turnover ≥ $75k/year
The $75,000 threshold uses your projected and current GST turnover (rolling 12 months). Cross it and you must register within 21 days.
Voluntary registration below $75k
Reasons to register early:
- Your clients are GST-registered businesses — they don’t care about the 10%, they claim it back
- You have significant business expenses with GST you want to reclaim
- You expect to cross $75k in the same financial year
Reasons not to register:
- Your clients are individuals or non-GST-registered businesses — 10% makes you 10% more expensive
- You have minimal GST-paying expenses
- You want to avoid quarterly BAS
Step 3 — Put the right things on the invoice
A contractor invoice in Australia needs:
- The words “Tax invoice” (only if GST-registered)
- Your business name (sole trader: your full name + trading name if any)
- Your ABN — non-negotiable
- Date issued
- Invoice number (sequential, no duplicates)
- Client name and ABN (required for invoices $1,000+)
- Description of work — what, when, how much
- Rate and quantity — hours, days, units, fixed-price
- Subtotal, GST (if any), total
- Payment terms (Net 7/14/30)
- Bank details + reference
Step 4 — Pick payment terms
Standard contractor terms: Net 14 for ongoing engagements, Net 7 for new clients, 50% deposit + balance on delivery for fixed-price projects. Anything past Net 30 should be flagged as unusual — large enterprises often try to push contractors to Net 45/60 without negotiation. You don’t have to accept it.
The PSI (Personal Services Income) rules
If more than 50% of the income from a contract is for your skills, knowledge, or labour, the income is “PSI”. The ATO can apply PSI attribution which:
- Restricts deductions you can claim (home office, mobile, vehicle, super, employees)
- Pushes the income to you personally even if invoiced through a company or trust
- Effectively neutralises the tax benefit of using a corporate structure
You can escape PSI attribution by passing one of the four PSI tests, the easiest being the Results test:
- You’re paid for a result (not hours)
- You provide your own tools/equipment
- You’re liable to rectify defects
PSI doesn’t change what your invoice looks like. But it does change how you should think about contract structure and whether your trust/Pty Ltd is actually saving you tax.
Super on contractor invoices
The Superannuation Guarantee (Administration) Act extends super to certain contractors — specifically, those paid wholly or principally for their labour. If that’s you, the hirer must pay 12% super (in 2026) on top of your invoice, into your nominated super fund.
For genuine result-based contracts (fixed-price deliverable, ability to delegate), there’s no super obligation. Many hirers get this wrong in both directions — either skipping super they owe, or paying super on invoices that don’t qualify. Worth raising it explicitly at contract sign-up.
Sample contractor invoice
TAX INVOICE Jane Doe (trading as Doe Design) ABN 12 345 678 901 22 Park Rd, Brisbane QLD 4000 jane@doedesign.com.au Invoice #: INV-2026-0118 Date issued: 2026-06-04 Payment due: 2026-06-18 (Net 14) Bill to: ACME Marketing Pty Ltd ABN 99 888 777 666 1 Queen St, Brisbane QLD 4000 Description Qty Rate Amount ------------------------------------------------------------------------ Brand strategy consulting, period: 12–30 May 2026 (per SOW #SOW-2026-04) 18 $140 $2,520.00 Subtotal $2,520.00 GST (10%) $252.00 Total due $2,772.00 Reference: INV-2026-0118 Bank: CBA | BSB: 062 000 | Acct: 1234 5678 | Acct name: Jane Doe
Common contractor invoicing mistakes
- Forgetting the ABN — instant 47% withholding
- Writing “Services rendered” — describe what, when, how much (see descriptions guide)
- Reusing invoice numbers — the ATO and your client’s AP both expect uniqueness
- Charging GST when not registered — illegal, refundable on demand
- Sitting on a long-running engagement without invoicing — bill weekly/fortnightly to manage non-payment risk
- No reference number for the bank transfer — payments untraceable, reconciliations painful
Tools to make contractor invoicing painless
Free Invoice App is built for this exact case — sole traders and contractors who want a fast, ATO-compliant invoice without the overhead of full accounting software. You get:
- ABN always present on the invoice (you can’t accidentally omit it)
- One-click GST toggle for when you cross the threshold
- Hourly, daily, fixed-price line items
- Auto-numbered invoices
- Email send + payment status tracking
- 5-year record-keeping done for you
- Free plan covers up to 7 invoices/month; Pro plans cover heavy contractor volume
Compare against the alternatives: best free invoicing software.
Frequently asked questions
Do I need an ABN to invoice as a contractor in Australia?
Effectively yes. If you don’t quote an ABN on your invoice, the payer is required to withhold 47% of the payment and remit it to the ATO. There are narrow exceptions (one-off payments under $75, statements by supplier for non-business activity), but for almost all contractor work you need an ABN.
Do contractors need to charge GST?
Only if your annual GST turnover is $75,000 or more, or you choose to register voluntarily. Below the threshold you don’t charge GST and you can’t claim input tax credits. Once registered, you must add 10% GST to all taxable Australian supplies and lodge BAS.
What are the PSI rules and how do they affect contractor invoices?
Personal Services Income (PSI) rules apply when more than 50% of your contract income comes from your personal skills/labour. If you fail the PSI tests, the ATO may treat your income as if it were salary — limiting deductions and pushing tax onto you, not your company. PSI doesn’t change what goes on the invoice itself, but it changes how you can structure your business.
Do clients pay super on contractor invoices?
Sometimes. Under the SGAA, a contractor paid mostly for their labour (not a result) is deemed an employee for super purposes. The hirer must pay super on top of the invoice (12% in 2026). For genuine result-based contracts (fixed-price deliverable, sub-contracting permitted), there’s no super obligation.
How often should I invoice a long-term client as a contractor?
Weekly or fortnightly for hourly/daily-rate engagements; monthly for retainers. Smaller, more frequent invoices clear faster through AP queues and improve cash flow. Long-running contracts on a single end-of-engagement invoice expose you to non-payment risk.