A proforma invoice is a preliminary, non binding document you send before a sale is finalised, setting out the expected goods, services, prices, and total so the buyer can review and approve them. It is not a valid tax invoice, which means your customer cannot use it to claim a GST credit, and you should always follow it up with a proper tax invoice once the sale actually happens.
Think of a proforma invoice as a good faith preview of the real bill rather than a demand for payment.
- What it is for: A proforma invoice confirms the price, scope, and terms before any money changes hands. It is commonly used to lock in a quoted amount, to request a deposit, to support a customs declaration on imported or exported goods, and to give a buyer something formal to take to their own approval or budget process.
- Why it is not a tax invoice: Under Australian Taxation Office rules, a sale has not yet been made when you issue a proforma, so it does not count as a tax invoice. For purchases over 82.50 dollars including GST, a buyer needs a valid tax invoice to claim a GST credit, and a proforma will not satisfy that. Once the sale is confirmed, you issue the actual tax invoice, and that is the document your client keeps for their records.
How a proforma differs from the documents around it.
- Versus a quote: A quote is usually a looser estimate offered early in a conversation, often before scope is locked. A proforma is more detailed and formal, laid out to look almost exactly like the final invoice, which makes it useful when the deal is close to agreed and the buyer wants certainty on the numbers.
- Versus a tax invoice: A tax invoice is the binding request for payment issued at or after the point of sale, and it is the document that carries GST credit entitlements. A proforma carries no such status and creates no obligation to pay.
Practical tips for getting it right in Australia.
- Label it clearly: Put the words Proforma Invoice at the top so there is no chance it is mistaken for a tax invoice. Mixing the two up is the most common error.
- Include your ABN: Even though it is preliminary, showing your business name and ABN keeps it professional and consistent with the final invoice you will send.
- Mark any GST as estimated: You can show an estimated GST amount so the buyer sees the likely total, but make it obvious that the figure is an estimate and not a claimable tax amount.
- Convert it cleanly: When the sale goes ahead, reissue the document as a proper tax invoice with its own unique number rather than relying on the proforma.
InvoiceSonic, a free invoice generator, makes it easy to produce a clean proforma and then turn out the matching tax invoice when the work is done, so your numbers stay consistent across both. This is general information only and not tax advice, so confirm your situation with a registered tax agent or the ATO.