What is a Proforma Invoice?

Proforma invoice definition

The term "pro forma" is Latin for "as a matter of form". A proforma invoice is a draft of what a real invoice would look like if the buyer accepts the offer and the transaction proceeds. It serves three practical purposes in Australian business:

• Confirms pricing and item details with the buyer before they commit
• Helps the buyer set up a purchase order or arrange internal approval
• Supports advance payment, deposits, or letters of credit on larger orders

A proforma is not a request for payment in the legal sense. It does not appear in your BAS, you do not record GST on it, and you do not include it in your sales reports until you issue the corresponding tax invoice.

Proforma invoice vs tax invoice

This is the single most-asked question — and the difference matters for GST.

If you label a document "Tax Invoice" but you are not GST-registered, or if a buyer tries to claim GST from a proforma, the ATO can refuse the credit and apply penalties. The wording matters.

Proforma invoice vs quote

A quote and a proforma overlap — both are preliminary and non-binding — but they have different uses:

• Quote: an offer to do work at a stated price. Used early in the sales process. Often informal in format.
• Proforma invoice: looks like a real invoice and is typically issued after a quote has been verbally accepted, when the buyer needs an invoice-shaped document to approve payment, arrange a deposit, or release stock.

In Australian practice, quotes are common in trades and services; proformas are common in wholesale, manufacturing, importing, and international trade where buyers need a formal document to authorise pre-payment.

When to use a proforma invoice

Use a proforma invoice in any of these scenarios:

• Deposits and prepayments. When a buyer needs to pay 30% or 50% upfront before you start work or ship goods.
• Cross-border sales. Importers and customs brokers often need a proforma to calculate duties and arrange a letter of credit before goods leave the supplier.
• Corporate procurement. Larger buyers may need a proforma to raise an internal purchase order in their accounts system.
• Manufacturing and custom orders. When you need to confirm exact specs, quantities, and pricing before you build to order.
• Stock reservations. When the buyer needs an invoice-shaped document to release a stock hold from your warehouse.

Once the order is fulfilled, you issue a corresponding tax invoice — that is the document the ATO sees and that the buyer claims GST from.

What to include on a proforma invoice

A proforma invoice should look almost identical to a tax invoice, with three key differences:

1. It must be clearly labelled "Proforma Invoice" — never "Tax Invoice".
2. It should include an expiry or validity date ("Valid for 30 days from issue").
3. It should state that "This is not a tax invoice", usually as a footer line.

Standard fields to include:

• "Proforma Invoice" header
• Your business name and ABN
• Buyer's name and address
• Proforma number and issue date
• Validity period or expiry date
• Itemised list of goods or services with quantities and unit prices
• Subtotal, GST (shown but flagged as "estimated"), and total
• Payment terms if accepted (e.g., "50% deposit on confirmation")
• Footer: "This document is not a tax invoice. A tax invoice will be issued on supply."

How GST works on a proforma invoice

GST does not apply to a proforma invoice because no taxable sale has happened yet. You can show an estimated GST amount on the proforma so the buyer knows the all-in cost — but you do not report it to the ATO and you do not include it in your BAS until you issue the actual tax invoice.

When the buyer pays a deposit, the GST on that deposit is triggered on the date you receive the money (the "attribution rules" in the GST Act). At that point you issue a tax invoice for the deposit. The proforma's job is done.

For non-GST-registered suppliers (turnover under $75,000), no GST is shown on either document.

Frequently asked questions

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