Edited version of private ruling

Authorisation Number: 1011615616482

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Ruling

Subject: Request to use recipient created tax invoices

Relevant facts and circumstances

You operate a service company for a medical general practice.

You are registered for the goods and services tax (GST).

You have entered into an agreement with your suppliers and you have provided a copy of the agreements to the Australian Taxation Office (ATO).

You have advised that there is no pending audit, however the June 2009 BAS underwent a verification check where RCTI issues were raised, resulting in this request.

You have advised that this request is made to expedite the payment to your suppliers at the completion of each week and wants to issue RCTI at the same time to file with the payments made, this would enable smooth continual accounting for the practice overall.

You confirm that you satisfy the requirements as set out in Clause 5 of RCTI 2000/22.

You confirm that you satisfy the requirements as set out in Clause 6 of RCTI 2000/22, Calculations process, as each supplier's consultations are recorded in separate income accounts in the reconciled accounting software of your accounts. The income is calculated by you based on the data held and gathered on behalf of the consultants, the practice pays the consultants the agreed percentage of income received.

You have provided copies of the agreement mentioned above.

Detailed reasoning

Paragraph 29-70(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that 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).

A recipient created tax invoice is defined in subsection 29-70(3) of the GST Act as:

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.

Goods and Services Tax Ruling GSTR 2000/10 outlines the circumstances in which a recipient is entitled to issue RCTIs. The Commissioner has determined that three classes of tax invoices can be issued by a recipient of a taxable supply. Tax invoices that come within any of these three classes can be issued by recipients without notifying or applying to the Commissioner. These classes are:

1. Supplies of agricultural products made to registered recipients;

2. Supplies made to registered Government entities; and

3. Supplies made to registered recipients that have an annual turnover of at least $20 million.

Based on the information provided, 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 the recipient of a taxable supply that are not listed in GSTR 2000/10.

Of relevance to you is A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No. 23) 2000 (RCTI 2000/22).

Clause 4 of RCTI 2000/22 states:

A tax invoice that belongs to a class of tax invoices for a taxable supply of referrals may be issued by an entity that is the recipient of that supply where the recipient:

(i) establishes the value of those services after the supply is made using a calculation process; and

(ii) satisfies the requirements set out in Clause 5.

Clause 5 of RCTI 2000/22 contains the following requirements that must be satisfied by a recipient of a taxable supply before the recipient can issue RCTIs:

(a) the recipient must be registered for GST when the invoice is issued;

(b) the recipient must set out in the tax invoice the ABN of the supplier;

(c) 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;

(d) the recipient must issue the original or a copy of an adjustment note to the supplier with 28 days of the adjustment and must retain the original or the copy;

(e) the recipient must reasonably comply with its obligations under the taxation laws;

(f) the recipient must issue the tax invoice pursuant to a written agreement that the recipient has with the supplier which specifies the supplies to which it relates and contains the following terms:

· 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: 

(i) the recipient may issue tax invoices in respect of the specified supplies;

(ii) the supplier will not issue tax invoices in respect of those supplies;

(iii) the supplier acknowledges that it is registered when it enters the agreement and that it will notify the recipient if it ceases to be registered;

(iv) 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 GST.

(g) 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;

(h) if the recipient has a current annual turnover of less than $1,000,000, it must notify the Commissioner in writing of the recipients 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 the recipient or before 14 days have elapsed since this Determination was signed, whichever is later. 

The following expressions are defined in clause 6 of RCTI 2000/22:

calculation process means any process used by the recipient to calculate the commission or payment to the service provider;

referrals means the activity of publicising and promoting an entity and/or the goods and services of that entity with the aim of directing potential clients to that entity. This includes but is not restricted to services such as direct referrals, the display of promotional pamphlets and the inclusion of a hyperlink on a website;

service provider means the entity providing referrals to the recipient.

As you calculate the amounts to be paid to your suppliers based the number and dollar value of the consultation's conducted in a week you then pass on the agreed percentage amount of this calculated amount on a weekly basis. You meet the requirements of clause 4(i) of RCTI Determination 2000/22. Therefore as your situation fits within the scope of the abovementioned determination, you can issue RCTI's for the taxable supplies of services made to your suppliers whose details you have supplied in the facts stated above. Based on the information provided, you also satisfy the requirements of Clause 5 of RCTI Determination 2000/22.

Please note that you and your suppliers are required to retain an original or a copy of the RCTI and any adjustment note for five years.

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