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Edited version of your written advice
Authorisation Number: 1012778991812
Ruling
Subject: GST and the issuing of RCTIs for referral services
Question
Are you entitled to issue recipient created tax invoices (RCTIs) for the taxable supply you receive from a Referrer for which you pay a reward amount which is calculated as a percentage of fee paid by another entity to you?
Answer
Yes, you are entitled to issue recipient created tax invoices (RCTIs) for the taxable supply you receive from a Referrer for which you pay a reward amount which is calculated as a percentage of fee paid by another entity to you.
Relevant facts and circumstances
You are developing an application (the App) that will allow users to access and apply for certain products issued by other entities.
You will reward users (Referrer) who refer the application to other persons that download the App. These referrals are taxable supplies for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
A reward amount will be paid into the Referrer's bank account and is calculated as a percentage of a fee paid by the other entities to you.
A Referrer will not be able to calculate the amount due to them. You will have an independent auditor confirming annually that the correct payments have been made.
If you are entitled to issue RCTIs, then you will:
• use an electronic purchasing system to arrange and record all reward transactions. You will keep these records for 5 years,
• be complying with the requirements mentioned under Clause 5 of A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No. 23) 2000 (RCTI 23),
• enter into an agreement with all Referrer's and it will be embedded in all RCTIs that it issues. The RCTIs will include the following statement:
The recipient and the supplier declare that this agreement applies to supplies to which this tax invoice relates. The recipient can issue tax invoices in respect of these supplies. The supplier will not issue tax invoices in respect of these supplies. The supplier acknowledges that it is registered for GST and that it will notify the supplier if it ceases to be registered for GST. Acceptance of the RCTI constitutes acceptances of the terms of the agreement. Both parties to this supply agree that they are parties to an RCTI agreement. The supplier agrees to notify the recipient if the supplier does not wish to accept the proposed agreement within 21 days of receiving this document.
The rewards for a referral service (which is a taxable supply) can only be calculated correctly by the recipient. If the information was provided by the recipient to the supplier, this would considerably detract from the effectiveness of the system and would significantly delay the rewards being sent to the supplier.
You will use a different form of invoicing for supplies made by Referrers that are not taxable supplies.
Relevant legislative provisions
Section 29-70 of the A New Tax System (Goods and Services Tax) Act 1999
Reasons for decision
Subsection 29-70(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides the following:
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.
(terms marked with asterisks (*) are defined in section 195-1 of the GST Act).
In Goods and services tax ruling Goods and services tax: recipient created tax invoices (GSTR 2000/10) the Commissioner of Taxation (the Commissioner) has made a determination regarding the classes of taxpayers who may issue recipient created tax invoices (RCTIs). In addition to the three broad classes of taxpayers who may choose to issue RCTIs as outlined in GSTR 2000/10, industry associations, whose members are recipients of taxable supplies that are not covered by these broad classes, can ask the Commissioner to make a determination for other classes of tax invoices.
In A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No. 23) 2000 (RCTI 23) the Commissioner has made such a determination. Under RCTI 23, 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 taxable 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.
We are of the view that the Referrer's services can be considered as a referral service as described in RCTI 23. Therefore, as you have confirmed that you will be meeting the requirements listed in Clause 5 of RCTI 23, you as the recipient of the referral services supplied by the Referrers may choose to issue RCTIs.
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