Edited version of your private ruling

Authorisation Number: 1012455321283

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.

Relevant facts and circumstances

· You are a company incorporated overseas.

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

· You report for GST on a monthly basis.

· Your annual turnover for your Australian operation is less than $20 million.

· You hire equipment from an Australian entity, a company which hires a comprehensive range of equipment to various industries.

· You re-hire this equipment to your clients overseas who pay you a fee based upon their usage of the equipment.

· A fixed percentage of the fees paid by your customers is then payable to your supplier in Australia.

· You have a formal agreement with your supplier relating to hire rates and percentages.

· The hiring fees, both to you from your suppliers and by you to your customers, are based on usage times and dates and are variable to each piece of equipment.

· You invoice your clients on a monthly basis and thereafter provide the necessary information to your supplier to enable the supplier to generate a tax invoice.

· Given the above, you are of the view that it would be convenient for you to issue recipient created tax invoices (RCTI) in respect of the supplies made to you by your supplier.

· 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

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 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 indicate that you, as the recipient of the taxable supplies, are the entity that determines the price of the supplies made to you. However, the nature of the transaction which is the subject of this ruling and the kind of tax invoices issued does not form a broad class of tax invoices to merit the Commissioner to initiate a process to issue a legislative instrument for the purpose of making a legislative determination (RCTI Determination). Nevertheless, if an industry body, representing a significant number of enterprises engaged in activities identical to those you are engaged in, makes an application to the Commissioner for consideration, the Commissioner may, on the merits of such a case, initiate a process to issue a legislative instrument. As the Commissioner does not consider that there is a broad class of tax invoices falling into the circumstances you have described, on this occasion, the Commissioner will not initiate a process to issue a legislative instrument.

However 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.