Invoicing for Subscription Services & SaaS

Recurring invoices — automated vs manual

Subscription businesses typically generate high volumes of invoices on a repeating schedule. For most SaaS and subscription operators, automated invoicing via a subscription billing platform (such as Stripe Billing, Chargebee or Recurly) is the practical approach. These platforms can:

Generate and send a compliant tax invoice at each billing cycle
Apply GST automatically based on the subscriber's location
Handle failed payments and dunning automatically
Issue pro-rata invoices at sign-up and cancellation
Store invoice records for ATO compliance

If you are invoicing a smaller number of recurring clients manually, use our free invoice generator and see the recurring invoices guide for best practice on numbering and record-keeping.

Pro-rata billing at start and end of subscription

When a subscriber starts or cancels mid-period, you need to charge or refund only for the portion of the period they were active. The calculation is straightforward:

Pro-rata at sign-up: Daily rate = (Monthly fee ÷ days in month). Charge = Daily rate × remaining days. Show on the invoice: "Pro-rata subscription: 16 days × $X/day = $Y (inc. GST)". Then from the following billing date, the full monthly fee applies.
Pro-rata at cancellation: If you issue refunds for unused subscription days (not all businesses do — check your terms), calculate: Daily rate × unused days remaining. Issue an adjustment note (credit note) for the refund amount, referencing the original invoice.

GST on SaaS and digital subscriptions

SaaS subscriptions and digital services provided to Australian subscribers are generally taxable supplies at 10% GST. For overseas subscribers who are businesses (not Australian consumers), the supply may be GST-free as an export of services — but the rules are complex and depend on where the service is consumed and the nature of the subscriber. See ATO: Exports of services for guidance.

Note: since 2017, overseas digital service providers supplying to Australian consumers are required to register for Australian GST if their supplies to Australians exceed $75,000/year. If you are an overseas provider, check the ATO: Digital products and services.

Failed payment handling and dunning

Failed payments are an inevitable part of subscription billing. A structured dunning sequence reduces churn from involuntary cancellations:

Day 0: Payment fails — send an immediate email with a link to update payment details
Day 3: Retry the payment. If successful, confirm by email. If not, send a second reminder.
Day 7: Third attempt and firm reminder — note the subscription is at risk
Day 10–14: Final retry. If still unpaid, suspend access and send a cancellation notice

The goal is to recover the payment while retaining the subscriber. Keep the tone helpful rather than punitive — most failed payments are due to expired cards, not deliberate non-payment.

Credit notes for cancellations and refunds

When you issue a refund (partial or full), you must also issue an adjustment note (credit note) under GST law. The adjustment note must include your ABN, the words "adjustment note", the date, a description of the adjustment and the GST amount. Match the adjustment note to the original invoice. Both documents need to be retained for your BAS records and ATO compliance.

PCI compliance note

Never store payment card numbers, CVV codes or expiry dates on invoices, in email attachments, or in your business systems unless your infrastructure is PCI DSS compliant. Use a reputable payment processor (Stripe, Square, eWAY) that handles card data on your behalf. Your invoices should reference the payment method (e.g. "Charged to card ending 4242") without including sensitive card data.

Linking invoices to your terms of service

Include a reference to your terms of service on your invoice or in the accompanying email: for example, "This subscription is governed by our Terms of Service at [URL]." This creates a clear record that the subscriber accepted your terms (including your refund and cancellation policy) before the charge was applied.

Frequently asked questions

Are SaaS subscriptions subject to GST in Australia?

Generally yes — if you are GST-registered and your customer is in Australia, SaaS subscriptions are taxable supplies subject to 10% GST. If the subscriber is an overseas business that is not in Australia, the supply may be GST-free as an export of services. The rules changed in 2017 to capture digital imports by Australian consumers, so overseas SaaS providers selling to Australians are also required to register for and collect GST. See the ATO's guidance on digital products and services.

How do I handle pro-rata invoices?

When a subscriber signs up mid-billing period, you charge for the remaining days in that period (pro-rata) before reverting to the standard billing cycle. For example, if your billing cycle is the 1st of each month and the subscriber joins on the 15th, the first invoice covers 15–31 of the first month at a daily rate. Show the calculation clearly on the invoice: 'Pro-rata subscription: 15 days at $X/day = $Y'.

What is a dunning sequence?

Dunning is the process of contacting subscribers whose recurring payments have failed, to recover the payment before cancelling the subscription. A typical dunning sequence: (1) immediate email on failed payment with a link to update payment details; (2) retry the payment 3 days later; (3) second email reminder; (4) final retry and warning; (5) subscription suspension if still unpaid. The goal is to recover the payment while retaining the customer. Many subscription billing platforms automate this process.

Do I need to link my invoices to my terms of service?

Not legally required on the invoice itself, but strongly recommended. Your invoice (or the email accompanying it) should reference where the subscriber accepted your terms of service, and include your refund and cancellation policy or a link to it. This creates a clear record of the subscriber's contractual obligations and your entitlement to payment.