Edited version of private ruling

Authorisation Number: 1011617919368

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Ruling

Subject: GST and Recipient Created Tax Invoices

Question

Are you entitled to issue Recipient Created Tax Invoices (RCTI's) to coaches for services provided to you?

Answer: No.

The Commissioner will not exercise his discretion pursuant to subsection 29-70(3) of the GST Act to allow you to issue RCTIs.

Relevant facts and circumstances

You are registered for GST and your turnover is less than $20 million per year.

Your members (coaches) provide coaching services to the public.

Currently each coach provides you with an invoice for their services performed, based on the "commission" they receive for conducting the lesson.

The coaches provide coaching services as specified in the agreement the coaches have with you.

The agreement provides that the coaches will provide (a) coaching, (b) lessons, and (c) teaching.

The agreement provides that there is no relationship in the form of employer and employee, principal and agent, partners or joint venture between you and the coach.

The agreement provides that you will pay a fee where you are in receipt of a valid tax invoice for the services that the coaches provide in accordance with the booking and cash collection process in place.

The agreement provides that you will pay the coaches a commission equal to 70% of the Gross Lesson Revenue.

A sales report is generated monthly for each of the coaches.

The Gross Lesson Revenue shows the revenue generated by each coach.

All bookings are made by the coach or another employee. These bookings are taken manually and the details entered on the booking system.

The information from the bookings entered into the booking system is used to calculate the payments due to the coach.

The fee charged to the person receiving the lessons/coaching is a set fee.

The coaches receive a set percentage (70%) of this set fee charged to the customer.

The monthly report is the data used to determine the amount paid to the coach. The data on this report is provided by the coach based on the bookings received through the coach or employee.

The coaches keep their own record of lessons provided and generate an invoice to you after they receive the monthly report.

Not all coaches used by you are registered for GST.

There are approximately five coaches used by you.

Summary

The Commissioner will not exercise his discretion pursuant to subsection 29-70(3) of the GST Act to allow you to issue RCTIs.

Detailed reasoning

Subsection 29-70(1) 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 an RCTI (in which case it must be issued by the recipient).

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

The Commissioner has determined under subsection 29-70(3) of the GST Act that three classes of tax invoices may be issued by a recipient of a taxable supply. These classes of tax invoices are explained under paragraph 10 of Goods and Services Tax Ruling GSTR 2000/10 (GSTR 2000/10) as:

(a) tax invoices for taxable supplies of agricultural products made to registered recipients who:

i. satisfy the requirements for issuing RCTI's, and

ii. determine the value of the agricultural products (and any by-products) subsequent to, and dependent upon, quantitative or qualitative analysis of the supply being undertaken (see paragraphs 22 to 24);

(b) tax invoices for taxable supplies made to registered government related entities that satisfy the requirements for issuing RCTI's (see paragraphs 25 to 27); and

(c) tax invoices for taxable supplies made to registered recipients that satisfy the requirements for issuing RCTI's and that:

i. have a GST turnover (including input taxed supplies) of at least $20 million annually; or

ii. are members of a group of companies, partnerships or trusts, or joint venture operator, in which one or more others members of that group or participants in that Joint venture have such a turnover.

Tax invoices that come within any of these three classes can be issued by recipients without notifying the Commissioner. The PGA tax invoices do not fall within any of these classes.

However, under paragraph 12 of GSTR 2000/10 other registered recipients of taxable supplies that are not covered by these three broad classes can request the Commissioner to make a determination for other classes of tax invoices.

The Commissioner has made a number of RCTI legislative instruments. In this case we have considered whether your circumstances fit into any of these legislative instruments. The one that fits closest to your set of circumstances is the A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (no.22) 2000 (RCTI 2000/22).

The Commissioner has made RCTI 2000/22 which provides that where the supplier makes a taxable supply of labour services the recipient of that supply may issue a tax invoice for the supply where the recipient:

establishes the value of those services after the supply is made using a calculation process, and

satisfies the requirements set out in Clause 5 of RCTI 2000/22.

Calculation process is defined in Clause 6 of RCTI 2000/22 to mean:

base data x appropriate rate.

Base data is the information provided by the supplier (the coaches) that evidences the quantity of the supply, and includes but is not limited to:

· completion of time sheets

· listing of consultations conducted

· completion of job dockets

· listing of sales achieved

· booking obtained, or

· providing the goods to the recipient where the labour services involve the collection or delivery of goods.

Appropriate rate means the rate as determined by the recipient (whether or not in consultation with the supplier) that takes into account information not readily available to the supplier when the supply is made. This includes but is not limited to:

· sales rebates

· third party rebates

· volume discounts

· confidential; contractual information, or

· where the labour services involve the delivery of goods, quantity or quality checks of those goods.

In this case, the supplier (coach) does not provide you with information that evidences the quantity of the supply as this information is kept by you. This information is also provided to the coaches. There are limitations placed on who can issue RCTI's and the circumstances in which they can be issued. For all of the RCTI determinations, one of these limitations is that the recipient must set the value of the supply after it is made and that value is set by way of some process or calculation that the recipient undertakes.

In this instance, the supplier is aware beforehand of the rate that is used to determine the value of the supply made. This is a fixed percentage (70%) of the set fee for the lessons, which is set by you. The amount of income generated from each lesson is readily available to the supplier (coach), when the supply is made.

As the information required to issue invoices is available to the supplier, the supplier is in a position to issue invoices to you. Therefore, you are not able to issues RCTI's to the supplier for supplies of services the supplier makes to you.

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