Suppliers and purchasers are required to account for the GST reverse charge in their accounts from 1 April 2017.
It is a condition that when you issue a tax invoice or recipient created tax invoice (RCTI) involving reverse charged transactions, the wording reverse charged is stated and aligned to the items sold under the reverse charge.
The tax invoice or RCTI is expected to reflect the amount of GST reverse charged or provide enough information to support the purchaser determining the amount of GST that has been reverse charged.
For record keeping purposes, as an immediate solution the supplier may select a GST-free transaction to record the reverse charged sale.
For a supplier's BAS, your key reporting requirements are:
- report reverse charge sales (aka GST-free supplies) at Label G1
- no GST reported for reverse charge sales at Label 1A.
For a purchaser's BAS, your key reporting requirements are:
- report GST payable for reverse charge sales at Label 1A.
If the purchaser is entitled to an input tax credit relating to the purchase, there is no change. Continue to report input tax credits using G11 or Label 1B.
Tax invoice or recipient created tax invoice
Tax invoices or recipient created tax invoices (RCTI) must include enough information to clearly inform both parties that a reverse charged transaction is present.
If your sales involve GST-free, reverse charge or taxable sales, it is important that your tax invoice or RCTI clearly reflects the corresponding transactions.
Details need to include:
- that the document is intended to be a tax invoice or RCTI
- the supplier's and purchaser's identity
- the supplier's Australian business number (ABN) and purchaser's ABN when RCTI is being used
- the date the invoice was issued
- a description of the items sold, including the ‘fineness’ (if applicable) and the price
- the GST amount (if any) payable – this can be shown separately or, if the GST amount is exactly one-eleventh of the total price, as a statement such as 'total price includes GST'
- the extent to which each sale on the invoice is a taxable sale (that is, the extent to which each sale includes GST)
- where the sale is clearly identified as being fully taxable and subject to a reverse charge, the words 'reverse charged’ needs to be displayed in the description line and directly aligned to the item being sold.
Example 1: Tax invoice involving a GST reverse charged transaction
1. GST reverse charged transaction
1A. The reverse charged GST amount payable is $4,000
2. GST free transaction
3. GST payable transaction
End of example
Example 2: Recipient created tax invoice (RCTI) involving a GST reverse charged transaction
1. GST reverse charged transaction
1A. The reverse charged GST amount payable is $4,000
2. GST free transaction
3. GST payable transaction
End of exampleSee also: