RCTI 2017/3 - Explanatory statement

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COMMONWEALTH OF AUSTRALIA

A New Tax System (Goods and Services Tax) Act 1999

Explanatory Statement

General outline of determination

1. This determination is made under subsection 29-70(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

2. Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws) the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.

3. This determination allows a ceding insurer or reinsurer to issue recipient created tax invoices (RCTIs) in certain circumstances.

4. This determination is a legislative instrument for the purposes of the Legislation Act 2003.

Date of effect

5. This determination commences on the day after its registration on the Federal Register of Legislation.

What is the determination about

6. Generally, under the GST Act, tax invoices are issued by the entity that makes the taxable supply.

7. The purpose of this determination is to outline a class of tax invoices (called RCTIs) that the Commissioner has determined may be issued by GST registered recipients of taxable supplies. The Commissioner makes the determination by taking into account a number of factors including the type of industry, the taxable supply, GST turnover of the recipient and certain requirements for issuing RCTIs. These factors reflect a balance between facilitating the practical use of RCTIs by businesses and maintaining the integrity of the GST system.

8. In accordance with the determination, a ceding insurer or reinsurer that is a recipient of a taxable supply of reinsurance or retrocession may issue a RCTI for the taxable supply if the entity:

(a)

establishes the value of the taxable supply rather than the supplier; and

(b)

satisfies the requirements set out in paragraph 6 of the determination.

What is the effect of this determination

9. The effect of this determination is to streamline payment and invoicing processes by allowing the recipient of a taxable supply, with the information to establish the value of the taxable supply, to issue the tax invoice.

10. This determination is substantially the same as the previous determination that it replaces. An entity that satisfied the requirements of the previous determination and that is a ceding insurer or reinsurer will generally satisfy the requirements of this determination.

11. Compliance cost impact: Minor - there will be no or minimal impacts for both implementation and ongoing compliance costs. This determination is minor or machinery in nature.

Background

12. This determination replaces A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice (RCTI) for supplies of reinsurance or supplies of retrocession Determination (No. 30) 2000 - F2006B11594 (previous determination) - registered on 17 November 2006. The previous determination is repealed on commencement of thus determination.

Consultation

13. Subsection 17(1) of the Legislation Act 2003 requires, before the making of a determination, that the rule-maker is satisfied that appropriate and reasonably practicable consultation has been undertaken.

14. Broad consultation has been undertaken. The draft determination and draft explanatory statement were published on the ATO Legal database at ato.gov.au seeking feedback and comments for a period of two weeks. Notice of the draft determination was also published to ato.gov.au and subscription alerts issued. Tax professionals and tax associations regularly review both the Legal database and ato.gov.au and further promulgate advice of new drafts issued in their internal news bulletins. The major legal publishers also publish news of the drafts in their key tax alerting services - such as the Weekly Tax Bulletin (published by Thomson Reuters Australia) and Tax Tracker and Tax Week (published by CCH Australia). Additionally, draft determinations and draft explanatory statements have been published on the ATO Consultation Hub. Links to these drafts were published in newsletters such as the Taxation News (Chartered Accountants Australia and New Zealand) weekly bulletin. No comments have been received to date.

Statement of Compatibility with Human Rights

This statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Goods and Services Tax: Recipient Created Tax Invoice Determination 2017 for Ceding Insurers or Reinsurers

The Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

Generally, tax invoices are issued by a supplier under the basic rules for GST. The Legislative Instrument allows a ceding insurer or reinsurer that is a recipient of a taxable supply of reinsurance or retrocession to issue the tax invoice (called a recipient created tax invoice) subject to a number of provisos.

Human rights implications

The Legislative Instrument does not engage any of the applicable rights or freedoms. It allows for the streamlining of invoicing and payment practices.

Conclusion

The Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

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Dated 29 March 2017

Signed by Timothy Dyce
Deputy Commissioner of Taxation

Legislative References:
A New Tax System (Goods And Services Tax) Act 1999
the Act

Legislation Act 2003
the Act

Human Rights (Parliamentary Scrutiny) Act 2011
the Act

Acts Interpretation Act 1901
the Act

Related Legislative Determinations:
RCTI 2017/3