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Edited version of your written advice

Authorisation Number: 1012980234673

Date of advice: 3 March 2016

Ruling

Subject: GST and Recipient Created Tax Invoices

Question

Are you entitled to issue recipient created tax invoices (RCTIs) to your contractor, for their taxable supply of finance brokering services provided to you for commissions?

Answer

Subsection 29-70(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides the following:

(terms marked with asterisks (*) are defined in section 195-1 of the GST Ac).

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 (RCTI's). In addition to the three broad classes of taxpayers who may choose to issue RCTI's 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. 49) 2000 (RCTI 49), the Commissioner has made such a determination. Under RCTI 49, a tax invoice that belongs to a class of tax invoices for a taxable supply of a defined commission and/or fee based service, may be issued by a recipient, where the recipient:

We are of the view that services provided by your contractor to you can be considered to be a defined commission and/or fee based service as described in RCTI 49 and where you meet all the other requirements listed in Clause 5 of RCTI 49, you will be entitled to issue RCTIs your contractor for their taxable supply of finance brokering services.

Relevant facts and circumstances

You are registered for goods and services tax and your turnover does not exceed $20 million dollars annually.

You conduct a credit advisory and finance brokering enterprise. You provide your customers with personal credit advice and assistance with the selection, application and settlement on all types of finance including home loans and loans for investment properties. You put through loan referrals to wholesale lenders and funders from whom you earn commission which is paid to you via an aggregator.

Up to recently you had a GST- registered broker working for you as a contractor. You and the contractor earned upfront and trail commissions which in this case were paid to you by the aggregator. Whilst the contractor was contracting to you, the aggregator would determine the amount of the commissions earned and pay these commissions to you and your contractor directly in a 50/50 split. The aggregator would issue one RCTI to you for your 50% share of the commissions and a separate RCTI directly to your contractor for his 50% share of the commissions.

The contractor no longer contracts or does any work for you. However they are still entitled to trailing commissions for the loans they helped to set up for as long as the term of the loan. Since their departure, the aggregator has been paying 100% of the commissions, including trailing commissions due to your contractor, directly to you and issuing a single RCTI to you for the entire amount of the commissions. You are required to on-pay the contractor his share of the commissions that are due to them.

Currently, upon the Electronic Fund Transfer (EFT) receipt of the payment from the aggregator, you receive a RCTI from the aggregator detailing the different commission types, the gross amount(s), the GST component(s) and the net payments(s). Accompanying this, you are provided with an unformatted Excel worksheet which you sort and filter according to business type and broker. The EFT payment is then processed and entered into your accounting program accordingly to determine the commissions due to each broker.

You are required to remit to the contractor their share of the commissions and as at the date of your ruling application you have forwarded the first payment to the contractor.

You acknowledge that you are required to enter into a written agreement with the contractor in accordance with the requirements as set out in Goods and Service Tax Ruling GSTR 2000/10 Goods and Services Tax: recipient created tax invoices (GSTR 2000/10).

Relevant legislative provisions

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

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