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Ruling

Subject: Recipient Created Tax Invoices

Question

Will the Commissioner make a determination to allow you to issue recipient created tax invoices?

Answer

No, the Commissioner will not make a determination to allow you to issue recipient created tax invoices.

This ruling applies for the following periods:

Not applicable in this case

The scheme commences on:

Not applicable in this case

Relevant facts and circumstances

You are a company carrying on an enterprise in the building industry.

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

Your annual turnover is less than $20 million.

You engage tradespeople as contractors to carry out specific tasks for your customers.

The tradespersons are registered for the GST.

These tradespersons invoice you for the work carried out.

The invoices the tradespersons issue to you may involve work the tradesperson has carried out for several of your customers.

The tradespersons may undertake contract work from other entities other than you.

The current invoicing method creates problems in managing your cash flow and also in the calculation of costs associated with each sale you make to your customers.

There are also difficulties for you in administrative functions as invoices often need to be chased up from tradespersons.

If the application to issue recipient created tax invoices (RCTI) is approved by the Australian Tax Office (ATO) you will enter into written agreements with the tradespersons in accordance with the requirements of the GST Act and also as detailed in Goods and Services Tax Ruling GSTR 2000/10 (GSTR 2000/10).

If the Commissioner makes a determination in respect of this application, you will be able to issue RCTIs on a regular basis and it will (a) improve your cash flow (b) reduce trade creditors and (c) reduce administrative burden you currently experience.

To your knowledge there is no peak industry body representing entities engaged in this kind of services and you are not a member of any industry body.

However, it is possible that there may be other entities carrying on enterprises similar to the one you are carrying on and who may benefit from the issuance of a RCTI determination.

To your knowledge there are no current RCTI determinations made by the Commissioner to cover this class of taxpayers.

Relevant legislative provisions

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

Reasons for decision

RCTI Determinations are made under subsection 29-70(3) of A New Tax System (Goods and Services Tax) Act 1999 ('the GST Act'). This subsection states as follows:

'A recipient created tax invoice 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.'

(Items marked with an asterisk are defined in section 195-1 of the GST Act)

Paragraph 10 of Goods and Services Tax Ruling GSTR 2000/10 (GSTR 2000/10), which deals with RCTIs, lists three broad classes of tax invoices in relation to which RCTI agreements may be entered into. These classes are established by the first Determination made pursuant to subsection 29-70(3) of the GST Act. The first such class is tax invoices for taxable supplies involving the determination of the value of agricultural products (and any by-products) subsequent to and dependent upon quantitative or qualitative analysis of the supply.

The second such class is tax invoices for taxable supplies made to registered government related entities.

The third such class is tax invoices for taxable supplies made to a registered recipient that (a) has an annual turnover, including input taxed supplies, of at least $20 million or (b) is a member of a GST group, or a member of a GST joint venture in which another member of the group, or another participant in the joint venture has such a turnover.

The design of the GST system in Australia is that the registered supplier issues the tax invoice. It is, normally, the supplier that is liable to remit the GST. It is not the practice to give on an entity-by-entity basis what in effect would be an exemption from this requirement so as to allow responsibility for issuing a tax invoice to be transferred from the particular supplier entity to the particular recipient entity.

Subsection 29-70(3) of the GST Act refers to classes of tax invoices, rather than the granting of permission to specific entities. Consistent with this, RCTI Determinations that have already been issued are in respect of broad classes rather than particular entities.

Paragraph 53 of GSTR 2000/10 mentions industry associations can make requests to the Commissioner for RCTI determinations. This reflects the concept of there being an identified need in a particular taxpayer community for a determination. Although the paragraph was added to in the Addendum of 27 September 2000 to include the sentence "Other registered recipients may also make requests," Determinations will only be made for broad classes of tax invoices rather than particular entities.

In situations where such broad classes of tax invoices exists, the Commissioner may initiate a process to issue a legislative instrument if the relevant registered recipients of taxable supplies make an application as a class.

The transactions you describe in your submission to us do not indicate that you, as the recipient of the taxable supplies, are the entity that determines the price of the supplies made to you. The price is predetermined and the supplier should be able to invoice you accordingly. It is not a situation where the price of the supply cannot be determined by the supplier and where you have to advise the supplier of the price. As such the Commissioner will not initiate a process to issue a legislative instrument in this instance.

The Commissioner, from time to time, does initiate processes for the issuance of legislative instruments where the circumstances of a broad class of recipients of taxable supplies merit a legislative determination. The issuance of a legislative instrument in that regard will be in compliance with Legislative Instruments Act 2003 and the relevant ATO practice statements current at that time.

The legislative determination so issued would be placed in the ATO website. Taxpayers will need to check the website to see whether any of the existing or new legislative determinations would allow them to issue RCTIs.

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