Quick answer
A deposit invoice is a normal invoice marked clearly as a deposit, issued before work begins. It references the original quote, charges 20–30% of the contract total, includes GST if you’re registered, and states the refund terms. The final invoice (issued at job completion) shows the full total, subtracts the deposit, and the balance owing is what the client pays now.
Why deposits exist (and what they actually do)
Deposits do three things for a service business:
- Secure your time. A client who has paid 25% is a client who is committed. Bookings filled with non-deposit clients are 3–5x more likely to ghost.
- Cover up-front material or sub-contractor costs. If you need to order materials, book sub-contractors, or license assets before delivery, the deposit covers it without dipping into your own cash flow.
- Set the tone for the engagement. Asking for a deposit signals professionalism. Clients who push back on a reasonable deposit are often the same clients who push back on the final invoice.
How much to ask for
Industry conventions for Australian small businesses:
- 10–15% — very small jobs, repeat clients, low up-front cost.
- 20–30% — the standard band for most service and trade jobs.
- 30–50% — jobs with significant up-front material cost, long lead times, or custom orders (kitchens, custom furniture, design retainers).
- 50%+ — full bespoke product or services with no salvageable output if the client cancels mid-project.
The figure isn’t a guess — it should map to your real exposure. If a job has $4,000 of materials due before delivery on a $10,000 contract, your deposit needs to cover at least that.
The deposit invoice template
Here’s the structure for a 25% deposit invoice on a $6,000 project:
TAX INVOICE — DEPOSIT
INV-0042-DEP — 4 June 2026
From: Acme Design Pty Ltd
ABN 12 345 678 901
To: Client Name Pty Ltd
ABN 98 765 432 109
———————————————————————————————————————————————————————————
Deposit — 25% of Acme Website Build
(per quote Q-0019, total $6,000) $1,500.00
———————————————————————————————————————————————————————————
Subtotal: $1,500.00
GST (10%): $ 150.00
Total (AUD): $1,650.00
Due BEFORE work commences.
Refund: This deposit is non-refundable once work begins.
Refundable in full if cancelled within 48 hours of acceptance.
Payment:
BSB / Account: 000-000 / 000 000 000
Account name: Acme Design Pty Ltd
PayID: hello@acmedesign.com.auThe key signals: the “DEPOSIT” tag in the title, the original quote reference, the percentage stated explicitly, and the refund terms front and centre.
GST on deposits
The ATO treats deposits as part of the contract price when:
- The deposit is non-refundable, or
- The deposit is offset against the price on completion of the work.
In both cases — which covers almost every service business scenario — if you’re GST-registered, you do charge GST on the deposit. The deposit invoice is a tax invoice. The remaining GST is charged on the balance in the final invoice. Total GST collected across both invoices equals 10% of the full contract price.
The exception is a true “security deposit” (held in trust, returned at the end of the engagement) — this is not consideration and not subject to GST. Rare outside property and rental contexts. If unsure, get specific tax advice or check the ATO’s guidance on “deposits as consideration”. Full GST mechanics in how to add GST to an invoice.
Refund terms: state them upfront
The clearest refund policies pair well with happy clients:
- Non-refundable once work begins. Standard for design, development, and most professional services. Cover the time you’ve already invested.
- Cooling-off period. Refundable in full if cancelled within 24–72 hours of acceptance. Reassures the client and rarely triggers in practice.
- Pro-rated refund. Refunds proportional to work completed minus a setup fee. More work to administer, more fair for long projects.
- Forfeiture clause. Deposit is forfeited if the client breaches the agreement (cancels late, fails to provide required input).
Whatever the policy, it must be stated on the deposit invoice itself and in the engagement letter or quote. Silence is the worst option — ambiguity always gets resolved against you.
The final invoice: closing the deposit out
When the job is done, you issue the final invoice for the full contract total, with a dedicated line subtracting the deposit already paid. Continuing the example:
TAX INVOICE — FINAL
INV-0042-FIN — 18 June 2026
From: Acme Design Pty Ltd
ABN 12 345 678 901
To: Client Name Pty Ltd
ABN 98 765 432 109
———————————————————————————————————————————————————————————
Acme Website Build — complete $6,000.00
---------
Subtotal: $6,000.00
GST (10%): $ 600.00
Total (AUD): $6,600.00
LESS: deposit paid INV-0042-DEP $1,650.00
---------
BALANCE OWING (AUD): $4,950.00
Due 2 July 2026 (Net 14)
Payment:
BSB / Account: 000-000 / 000 000 000
Account name: Acme Design Pty Ltd
PayID: hello@acmedesign.com.auA few details worth noting on the final invoice:
- Full contract total + GST shown first. This is what is being invoiced for tax purposes.
- Deposit subtracted as a single line. Reference the deposit invoice number so the trail is clean.
- Balance owing is unambiguous. One line, one figure, due [date].
This structure makes the ATO trail clean: both invoices declare GST on the work they cover. Your accountant’s job stays simple at year end.
Progress invoices on bigger jobs
For jobs that run for weeks or months, you may have a deposit plus 2–3 progress invoices plus a final. The same pattern applies — each invoice references the contract total and shows how much remains. The final invoice subtracts all prior payments and shows the closing balance. For trades specifically, see how to invoice as a tradie for the progress-claim conventions.
The covering email
A deposit invoice email is short and direct — the client just accepted your quote, so this is the booking confirmation:
Subject: Deposit invoice INV-0042-DEP — Acme Website Build — Due before work starts Hi [Client first name], Thanks for the go-ahead on the Acme Website Build. Attached is the deposit invoice for $1,650 (25% of the project total), per the quote Q-0019. Work begins as soon as the deposit clears. Refund terms are on the invoice. Payment: BSB / Account: 000-000 / 000 000 000 Account name: Acme Design Pty Ltd PayID: hello@acmedesign.com.au Cheers, [Your name] ABN [your ABN]
How Free Invoice App handles deposits
Free Invoice App lets you mark any invoice as a deposit and reference the original quote number. The final invoice has a deposit-subtraction line item built in — pick the deposit invoice it relates to and the balance owing calculates automatically. GST is handled correctly on both sides. The Free plan covers it; no add-on required. Get started free.
Frequently asked questions
How much should I charge as a deposit?
20–30% is standard. Lower for very small jobs or repeat clients; higher for jobs with significant up-front material cost.
Do I charge GST on a deposit?
Yes, if you’re GST-registered and the deposit forms part of the contract price. Charge 10% GST on the deposit; the final invoice charges GST on the balance.
Is a deposit refundable?
Up to you, but the policy must be stated upfront. Most service businesses make deposits non-refundable once work begins, with a short cooling-off period.
How does the final invoice handle the deposit?
Show the full contract total, then subtract the deposit on a single line referencing the deposit invoice number. The balance is what the client pays now.
Do I need to mark it as a tax invoice?
Yes, if GST is being charged. The words “Tax Invoice”, your ABN, the GST line, and the buyer’s ABN (if the deposit is $1,000+) are required.