A proforma invoice is a document that looks like an invoice but is issued before the supply, usually so the customer can pay in advance or get the purchase approved internally. It is not a demand for payment, it creates no debt, and it does not go into your income. Critically, in Australia it is not a tax invoice — your customer cannot claim a GST credit from one, and you must not label it as one.
When you would issue one
- Payment up front. A new client, a first job, or a customer with a history — you want the money before you start, and a proforma is the document to ask with.
- A deposit. The proforma covers the deposit; the tax invoice follows once the work is done.
- Internal approval. A corporate customer whose finance team cannot raise a purchase order from a quote, but can from something invoice-shaped.
- Exports. Customs and freight forwarders routinely ask for a proforma invoice to value a shipment before it moves.
- Confirming a variable price. Where quantities or freight are not final, a proforma states the expected figures without committing either party to them.
Proforma invoice, quote, or invoice?
| Quote | Proforma | Invoice | |
|---|---|---|---|
| Purpose | Win the work | Collect payment before supplying | Record a completed supply |
| Timing | Before agreement | After agreement, before supply | After supply |
| Creates a debt | No | No | Yes |
| Is a tax invoice | No | No — never | Yes, if you are registered for GST |
| Customer can claim GST | No | No | Yes |
| Goes in your income | No | No | Yes |
| Numbering | Its own sequence | Its own sequence | The invoice sequence, no gaps |
The short version: a quote persuades, a proforma collects, an invoice records. A quote and a proforma can contain identical numbers — the difference is that a proforma is presented as something to pay against.
Why it cannot be a tax invoice
This is the part that has real consequences. A document only works as a tax invoice if it was intended to be one and it relates to a supply that has been or will be made. A proforma is explicitly provisional, so:
- Your customer cannot claim a GST credit from a proforma, no matter how much GST it shows. If they try, the claim is not supported.
- Never write "Tax invoice" on it. Head it "Proforma invoice", clearly, and many businesses add a line saying "This is not a tax invoice".
- Issue the real tax invoice afterwards — once payment is received or the supply is made, depending on how you account for GST.
- Do not report it as income. A proforma is not revenue and is not a receivable. Nothing has been supplied and nothing is owed.
What a valid tax invoice must show is set out in how to invoice with GST.
What to put on one
Everything you would put on an invoice, plus the labelling that stops it being mistaken for one:
- The heading "Proforma invoice", prominently, and not the words "tax invoice" anywhere on the page.
- Your business name and ABN, as usual.
- A proforma reference number from its own sequence — PF-0001, never your next invoice number.
- The date, and a validity period. "Valid for 14 days" protects you when prices move.
- Line items, quantities and prices, with GST shown if you are registered — labelled as the GST that will apply.
- How to pay, and what happens next — that a tax invoice will follow on payment.
Keeping proformas out of your invoice sequence is the single most useful habit here. Numbering gaps are what make a set of records look wrong when it is not.
What happens after it is paid
- The money arrives. Now something has happened for GST purposes.
- Issue a tax invoice for the amount received, referencing the proforma number so the customer can match them.
- Record the income against the tax invoice, not the proforma.
- Report the GST in the period determined by your accounting method — on a cash basis, the period you received the money; on accruals, the earlier of the invoice or the payment. See cash vs accrual accounting.
If the customer never pays the proforma, nothing needs undoing. That is the whole advantage of the document — no debt was ever created, so there is no credit note to issue and nothing to write off.
Related reading
- What is an invoice? — the document that follows the proforma
- How to invoice with GST — what makes a tax invoice valid
- How to get paid on time — deposits, terms and reminders
- What is a purchase order? — often the reason a client asks for a proforma
Frequently asked questions
No, and it cannot be made into one by adding a GST line. A tax invoice must be intended as one and must relate to a supply. A proforma is explicitly provisional, so your customer cannot use it to claim a GST credit. Issue a real tax invoice once payment is received or the supply is made.
No. Nothing has been supplied and no debt exists, so a proforma is neither income nor a receivable. It only enters your books when it is paid or converted into a tax invoice. This is also why an unpaid proforma needs no credit note and no write-off — there was never anything to reverse.
A quote is an offer to do work at a price, aimed at winning the job. A proforma is issued after the customer has agreed, and is presented as something to pay against — often for a deposit, or so their finance team can raise a purchase order. The figures on the two are frequently identical.
If you are registered for GST, show the GST that will apply, so the customer knows the real total. Label it clearly as the GST that will be charged, keep the heading "Proforma invoice", and never write "Tax invoice" on the document. The customer claims the credit from the tax invoice you issue afterwards, not from this.
No. Give them a separate sequence such as PF-0001. Using invoice numbers for documents that may never become invoices puts gaps in your invoice sequence, and a gap is exactly what makes a set of records look incomplete to anyone reviewing them.
Sources
Tax invoice requirements and the GST attribution rules come from the Australian Taxation Office; general invoicing practice from business.gov.au. Confirm the current position at ato.gov.au or with a registered tax agent. Balaana is bookkeeping software, not a tax agent — this article is general information, not personal tax advice.