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Ruling

Subject: Recipient Created Tax Invoice

Question

Can you issue recipient created tax invoices (RCTIs) for the driving services provided to you?

Answer

No, under your current agreement.

Relevant facts and circumstances

You are registered for GST.

You provide a hire car booking service, allowing passengers to book transport through your service.

Passengers pay a fee to you through your booking service.

Drivers collect and deliver the passengers who have booked through your service.

You calculate the fee and charge the passenger's credit card.

Drivers do not collect any consideration for the service from passengers.

At the end of each billing period each driver is paid a pre-agreed percentage of all fees collected by you from passengers they have transported.

Given the nature of the industry and service you receive, you believe you are able to more accurately calculate the amount of the tax invoice.

The rates charged to passengers are calculated according to a base fee per booking, km travelled and time taken, with a minimum charge per booking.

Drivers receive the fees collected minus your X% commission.

You have provided an agreement which details the payment terms between you and your drivers.

This agreement states that you issue an invoice request to drivers and the drivers must then provide you with a tax invoice consistent with the request.

Relevant legislative provisions

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

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 is issued by the recipient of the supply.

Subsection 29-70(3) of the GST Act defines an 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.

Goods and Services Tax Ruling GSTR 2000/10 Goods and services tax: recipient created tax invoices explains the determination that the Commissioner has made under subsection 29-70(3) of the GST Act. The ruling provides an entity can issue RCTIs if they belong to a class of entity under the determination. The ruling also explains how you may ask the Commissioner to make a further determination of other classes of invoices when you do not fit into any of the classes under the determination.

The Commissioner has determined 3 classes of tax invoices that may be issued by the recipient of a taxable supply. These cover supplies of agricultural products, supplies to government related entities and supplies made to entities that have a turnover in excess of $20 million per annum.

You do not receive supplies of agricultural products, you are not a government related entity and you are not an entity with a turnover in excess of $20 million. Therefore you cannot issue RCTIs as a class of entity under the 3 classes contained in GSTR 2000/10.

However, if an entity is not covered by the 3 classes of RCTIs they may be able to issue RCTIs if they are covered by an RCTI determination. Paragraph 53 of GSTR 2000/10 provides that registered recipients of taxable supplies can request a determination to issue RCTIs.

A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No 22) 2000 (RCTI 2000/22) permits the recipient of a taxable supply of labour services to issue an RCTI for that supply. Clause 4 of RCTI 2000/22 provides that an RCTI may be issued by the recipient of a taxable supply of labour services where the recipient:

· establishes the value of those services after the supply is made using a calculation process; and

· satisfies the requirements set out in clause 5.

RCTI 2000/22 provides labour services include any incidental supply of goods (whether or not to the recipient) where those goods are necessarily supplied as a result of those services.

Drivers provide labour services to you by collecting and delivering passengers who have booked through your service.

In order to determine if you are eligible to issue RCTIs under RCTI 2000/22 we must determine if you establish the value of the services after the supply is made using a calculation process.

You arrange bookings through your booking system. Passengers pay a fee to you and no consideration is collected from the passenger by the driver. Drivers are paid at the end of each billing period based on a percentage of fees collected. Therefore, you establish the value of the services provided to you after the supply has been made.

RCTI 2000/22 defines calculation process is limited to 'base data x appropriate rate'.

RCTI 2000/22 defines base data as the information provided by the supplier that evidences the quantity of the supply, and includes but is not limited to:

· completion of time sheets;

· listing of consultations conducted;

· completion of job dockets (however described);

· listing of sales achieved (whether by type and/or volume);

· bookings obtained; or

· providing the goods to the recipient where the labour services involves the collection or delivery of goods;

The amount you pay to drivers is established by the amount of bookings obtained, km travelled and time spent. There is a base fee per booking, a rate for km and minutes, and a minimum amount received per booking. The supplies are calculated using base data as defined in RCTI 2000/22.

RCTI 2000/22 defines appropriate rate means the rate as determined by the recipient (whether or not in consultation with the supplier) that takes into account information not readily available to the supplier when the supply is made. This includes but is not limited to:

· sales rebates;

· third party rebates (for example, from a health fund);

· volume discounts;

· confidential contractual information; or

· where the labour services involves the delivery of goods, quantity or quality checks of those goods;

The rates charged are determined by you as recipient and take into account information obtained while the supply is being made. Information includes km travelled and amount of time spent on a delivery. The rates charged in the agreement with your drivers are consistent with the definition of appropriate rate in RCTI 2000/22.

However your current agreement must also satisfy the requirements in clause 5 of RCTI 2000/22. In your case the agreement states that drivers must issue a tax invoice to you, which does not constitute you, as recipient, issuing an RCTI. There is no written statement as required under clause 5(f) of RCTI 2000/22.

Therefore, although you establish the value of services after the supply is made using a calculation process, your agreement does not satisfy the requirements of clause 5(f) of RCTI 2000/22. You cannot issue RCTIs under your current agreement. To be eligible to issue RCTIs you must have an agreement in place that satisfies the requirements in clause 5 of RCTI 2000/22.