Edited version of private ruling

Authorisation Number: 1011587154642

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Ruling

Subject: Permission to issue Recipient Created Invoices

Issue 1

Permission to issue recipient created tax invoices (RCTIs)

Question 1

Will the Commissioner of Taxation (Commissioner) allow you to issue recipient created tax invoices (RCTIs) in respect of taxable supplies to you of used equipment?

Answer 1

Yes, the Commissioner will allow you to issue RCTIs in respect of taxable supplies to you of used equipment, provided the requirements of clause 5 of the A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No. 4) 2000 (RCTI 2000/4) are satisfied.

Issue 2

Information requirements for the RCTI and RCTI Agreement

Question 1

Does the sample RCTI you provided meet the information requirements of an RCTI?

Answer 1

Yes, the sample RCTI you provided meets the information requirements of an RCTI provided it is amended to include certain things.

Question 2

Does the sample RCTI Agreement you provided meet the information requirements of an RCTI Agreement?

Answer 2

Yes, the sample RCTI Agreement you provided meets the information requirements of an RCTI Agreement.

Relevant facts and circumstances

You are registered for GST.

You purchase used equipment.

You value the equipment depending on condition and current market value.

The equipment which can be used you recycle and sell.

Your GST turnover is less than $1 million.

You currently send to the supplier a request for invoice identifying the amount that needs to be invoiced.

You wish to issue RCTIs to your GST registered suppliers.

You have provided a sample copy of the RCTI Agreement and the RCTI.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 29-70

A New Tax System (Goods and Services Tax) Regulations 1999 Regulation 29-70.01

A New Tax System (Goods and Services Tax) Regulations 1999 Regulation 29-70.02

Reasoning issue 1 question 1

Paragraph 29-70(1)(a) of the GST Act provides that a tax invoice for a taxable supply must be issued by the supplier, unless it is an RCTI (in which case it must be issued by the recipient).

Subsection 29-70(3) of the GST Act provides that an RCTI is a tax invoice belonging to a class of tax invoices that the Commissioner has determined in writing may be issued by the recipient of a taxable supply.

GSTR 2000/10 which can be downloaded from the ATO website specifies three broad classes of tax invoices that may be issued by a recipient of a taxable supply. They are:

· tax invoices for taxable supplies of agricultural products made to registered recipients

· tax invoices for taxable supplies made to registered government related entities, and

· tax invoices for taxable supplies made to registered recipients that have a turnover of at least $20 million annually; or are members of a group of companies, partnerships or trusts, or a joint venture operator, in which one or more other members of that group or participants in that joint venture have such a turnover.

Based on the information supplied, you do not fall within any of these three classes. However, the Commissioner has also made a number of specific determinations under subsection 29-70(3) of the GST Act for certain classes of tax invoices that may be issued by a recipient of a taxable supply that are not listed in GSTR 2000/10.

The determination relevant to your case is RCTI 2000/4. Clauses 4 to 6 of RCTI 2000/4 provide the following:

Classes of Tax Invoices that may be issued by the recipient of a taxable supply

4. A tax invoice that belongs to a class of tax invoices for second hand goods may be issued by a recycler who is the recipient of a taxable supply where the recycler:

· establishes the value of those goods after the supply is made using a qualitative or quantitative process; and

· satisfies the requirements set out in Clause 5;

Requirements that must be satisfied by a recipient of a taxable supply

5. A recipient must satisfy the following requirements:

· the recipient must be registered for GST when the invoice is issued;

· the recipient must set out in the tax invoice the ABN of the supplier;

· the recipient must issue the original or a copy of the tax invoice to the supplier within 28 days of making, or determining, the value of a taxable supply and must retain the original or the copy;

· the recipient must issue the original or a copy of an adjustment note to the supplier within 28 days of the adjustment and must retain the original or the copy;

· the recipient must reasonably comply with its obligations under the taxation laws;

· the recipient must have either

· a written agreement with the supplier specifying the supplies to which it relates, that is current and effective when the RCTI is issued, agreeing that:

· the recipient can issue tax invoices in respect of the supplies;

· the supplier will not issue tax invoices in respect of the supplies;

· the supplier acknowledges that it is registered for GST when it enters into the agreement and that it will notify the recipient if it ceases to be registered;

· the recipient acknowledges that it is registered when it enters into the agreement and that it will notify the supplier if it ceases to be registered for GST; and

· the recipient indemnifies the supplier for any liability for GST and penalty that may arise from an understatement of the GST payable on any of the specified supplies received on a tax invoice the recipient issues; or

· an agreement with the supplier embedded in an RCTI it issues that contains the following statement:

The recipient and the supplier declare that this agreement applies to supplies to which this tax invoice relates. The recipient can issue tax invoices in respect of these supplies. The supplier will not issue tax invoices in respect of these supplies. The supplier acknowledges that it is registered for GST and that it will notify the recipient if it ceases to be registered. The recipient acknowledges that it is registered for GST and that it will notify the supplier if it ceases to be registered for GST. The recipient indemnifies the supplier for any liability for GST and penalty that may arise from an understatement of the GST payable on any of the specified supplies received on a tax invoice the recipient issues. Acceptance of this RCTI constitutes acceptance of the terms of this written agreement.

Both parties to this supply agree that they are parties to an RCTI agreement. The supplier agrees to notify the recipient if the supplier does not wish to accept the proposed agreement within 21 days of receiving this document.

· the recipient must not issue a document that would otherwise be a recipient created tax invoice, on or after the date when the recipient or the supplier has failed to comply with any of the requirements of this determination.

· if the recipient has a current GST turnover of less than $1,000,000, it must notify the Commissioner in writing of the recipient's intention to use recipient created tax invoices. This notification must be made before 14 days have elapsed after the first occasion that a recipient created tax invoice is issued by that recipient.

Definitions
6. The following expressions are defined for the purposes of this determination:

· recycler means an entity that principally acquires second hand goods for reworking into usable form. This includes goods such as paper, metal, glass and plastics.

In your case, you are a recycler of used equipment purchased from GST registered suppliers and value the equipment according to condition and market values. You recycle and sell the equipment. You determine the value of the equipment and therefore specify the amount remitted to the supplier. This arrangement with the suppliers meets the definition of a recycler as outlined in clause 6 of RCTI 2000/4.

Based on the information you have provided, the RCTIs you propose to issue belong to a class of tax invoices that the Commissioner has determined in writing may be issued by the recipient of a taxable supply. You are registered for GST. Your GST turnover is under $1,000,000. Your private ruling application is considered to be your written notification to the Commissioner in accordance with subclause 5(h) of RCTI 2000/4.

As such, the Commissioner will allow you to issue RCTIs provided all the other requirements of clause 5 of RCTI 2000/4 are also satisfied.

Reasoning issue 2 question 1

Tax invoices generally, including RCTIs, have a minimum level of content as set out in subsection 29-70(1) of the GST Act:

A tax invoice for a *taxable supply:

· must be issued by the supplier, unless it is a *recipient created tax invoice (in which case it must be issued by the *recipient); and

· must set out the *ABN of the entity that issues it; and

· must set out the *price for the supply; and

· must contain such other information as the regulations specify; and

· must be in the *approved form.

However, the Commissioner may treat as a tax invoice a particular document that is not a tax invoice.

(* asterisked terms are defined in the GST Act.)

Subsection 29-70(1) of the GST Act and regulations 29-70.01 and 29-70.02 of the GST Regulations provide that an RCTI must contain the following information:

· the words recipient created tax invoice stated prominently

· the date of issue of the tax invoice

· the name and ABN of the supplier

· the name and ABN of the recipient

· a brief description of each thing supplied

· for each description, the quantity of the goods or the extent of the services supplied

· the price for the supply

· if the RCTI is for one or more taxable supplies only, it must also contain:

· a statement to the effect that the total amount payable includes GST for the supply or supplies, or

· the following information:

· the total amount of GST payable, and

· a statement to the effect that the GST shown is payable by the supplier

· if the RCTI is for one or more taxable supplies and one or more GST-free or input taxed supplies, it must also:

· clearly identify each taxable supply, and

· contain the following information:

· the total amount of GST payable

· the total amount payable

· a statement to the effect that the GST shown is payable by the supplier.

Other than certain things, your sample RCTI meets the requirements as set out above.

Therefore, your sample RCTI will meet the information requirements of an RCTI provided it is amended to include those things.

Reasoning issue 2 question 2

Subparagraph 13(e) of GST 2000/10 states:

· the recipient must have either:

· a written agreement with the supplier specifying the supplies to which it relates, that is current and effective when the RCTI is issued, agreeing that:

· the recipient can issue tax invoices in respect of the supplies;

· the supplier will not issue tax invoices in respect of the supplies;

· the supplier acknowledges that it is registered for GST when it enters into the agreement and that it will notify the recipient if it ceases to be registered; and

· the recipient acknowledges that it is registered when it enters into the agreement and that it will notify the supplier if it ceases to be registered for GST, or

· an agreement with the supplier embedded in an RCTI it issues that contains the following statement:

The recipient and the supplier declare that this agreement applies to supplies to which this tax invoice relates. The recipient can issue tax invoices in respect of these supplies. The supplier will not issue tax invoices in respect of these supplies. The supplier acknowledges that it is registered for GST and that it will notify the recipient if it ceases to be registered. The recipient acknowledges that it is registered for GST and that it will notify the supplier if it ceases to be registered for GST. Acceptance of this RCTI constitutes acceptance of the terms of this written agreement.

Both parties to this supply agree that they are parties to an RCTI agreement. The supplier agrees to notify the recipient if the supplier does not wish to accept the proposed agreement within 21 days of receiving this document.

The sample RCTI Agreement you have provided meets the requirements set out above.

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