Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1011942633175

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: GST and recipient created tax invoices

Question

Can you issue recipient created tax invoices (RCTI) for the supply of referral services made by specified businesses to you in return for the commission?

Answer

Yes, you may issue RCTIs to the businesses for the referral services made to you, provided you satisfy all the requirements set out in A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoices Determination (No. 23) 2000 (RCTI Determination 2000/23).

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an Australian company which is registered for GST.

Your annual GST turnover is less than $20 million.

You acquire referral services from specified businesses (businesses) who direct their clients to you to order your products.

You pay commission to the businesses for their referral services. The commission you pay to the businesses is based on your monthly sales to their clients. You are the only entity that can calculate and determine the amount of the commission provided to the businesses as they do not know the amount of monthly sales for their referral services.

The businesses are registered for GST.

The commission will be calculated monthly and paid to the bank account nominated by the businesses.

There is no invoicing practice at the moment as the activity just began and the first month has not finished yet.

The businesses do not provide you with any additional information regarding their referral services. The businesses do not know which orders were placed until you tell them.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 Subsection 29-70(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 29-70(1)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 29-70(2)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 29-70(3)

Reasons for decision

Under paragraph 29-70(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) a tax invoice for a taxable supply must be issued by the supplier unless it is a recipient created tax invoice (RCTI), (in which case it must be issued by the recipient of the supply).

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 has determined in writing may be issued by the recipient of the supply.

In this case, the businesses are supplying a service of referring clients to you and in return you pay them consideration in the form of a commission payment. You are, therefore the recipient of this supply which will be a taxable supply where all the requirements under section 9-5 of the GST Act are satisfied.

Goods and Services Tax Ruling GSTR 2000/10 outlines the circumstances in which a recipient can issue an RCTI. The three broad classes of tax invoices that may be issued by a recipient of a taxable supply are:

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 a recipient of a taxable supply.

Of relevance to you is RCTI 2000/23. This determination allows the recipient of a taxable supply of referral services to issue a tax invoice for that taxable supply.

Goods and Services Tax Ruling GSTR 2000/10 outlines the circumstances in which a recipient can issue RCTI's. An entity can issue RCTI's if the Commissioner has determined in writing that the nature of the industry in which the entity operates warrants the use of RCTI's.

Further, the Commissioner has issued RCTI Determination 2000/23 which permits the recipient of a taxable supply of referral services to issue a tax invoice for that supply. RCTI Determination 2000/23 states in clause 4 that:

Clause 5 of the RCTI Determination 2000/23 sets out the requirements that must be satisfied by the recipient of a taxable supply, and states:-

5. A recipient must satisfy the following requirements:

(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;

(f) the recipient must have either:

Further, clause 6 of RCTI Determination 2000/23 provides definitions of the following:

Based on the facts given, we consider that the activities of the businesses in relation to the commission meet the definition of 'referrals' and that the businesses satisfy the meaning of 'service provider' for the purposes of RCTI Determination 2000/23. This is because they are the entity that promotes, sell and direct their clients to you. You are the recipient of that referral service and calculate commission to be paid to the businesses based on set criteria (that is, calculation process).

Therefore, RCTI Determination 2000/23 will entitle you to issue RCTIs to the businesses for the supply of the referral services made to you in return for the commission, provided you satisfy all the requirements as set out in clause 5 of RCTI Determination 2000/23 (stated above).

All references to GST rulings and determinations can be downloaded from the ATO website at www.ato.gov.au


Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).