Edited version of your private ruling

Authorisation Number: 1012565942907

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

The scheme commences on:

Not applicable

Relevant facts and circumstances

· You are a company carrying on an enterprise in the electrical compliance industry.

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

· Your annual turnover is less than $20 million.

· You engage subcontractors to carry out specific tasks for you and they are paid based on the type of job done or on an hourly basis.

· These subcontractors are registered for the GST.

· It is difficult for you to reconcile invoices received from your subcontractors in your job management system, invoicing system and in the accounting software you use.

· Your subcontractors (suppliers) provide you with paper invoices which you have to manually input into your computer systems and matched to jobs.

· This requires considerable amount of time and effort and resources to be expended both by you and by your subcontractors.

· You allocate a large number of individual jobs to subcontractors each month.

· Sometimes you have issues relating to the prices charged by your subcontractors based on the time spent on the job and you have to ask the subcontractor to re-submit their invoices.

· Most of your subcontractors have only basic understanding about invoices and accounting processes.

· As such, many of these subcontractors have difficulty in amending and/or re-issuing invoices.

· You have discussed these issues with your subcontractors and they have agreed it is convenient for them to inform you of the work they have performed and for you to raise the invoice as recipient created tax invoices (RCTI).

· This would be significantly quicker than the current process and alternative processes you have used.

· Issuing RCTIs will ensure that you are invoicing your customers accurately and also paying your subcontractors correctly. This will also ensure accurate BAS reporting.

· You are a small business and inordinate paper work and additional reconciliation work is a significant cost to you and impacts on your competitiveness against larger enterprises.

· If you are allowed to issue RCTIs, it will reduce the administrative work of your subcontractors and improve their compliance activities with respect to GST.

· If the application to issue 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).

· 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. This is the situation whether the contractual arrangement you have with your suppliers (subcontractors) is for a specific job or an hourly rate. These are not situations 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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