Edited version of your private ruling

Authorisation Number: 1012481669641

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Ruling

Subject: GST and valid recipient created tax invoices

Question 1

Do the recipient created tax invoices (RCTIs) issued by and RCTI agreements used by Entity 1 and Entity 2 combine to satisfy the requirements of subsection 29-70(1A) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, the RCTIs issued by and RCTI agreements used by Entity 1 and Entity 2 do not combine to satisfy the requirements of subsection 29-70(1A) of the GST Act.

Question 2

If the answer to question 1 is no, will the Commissioner exercise his discretion pursuant to subsection 29-70(1B) of the GST Act to treat documents issued by Entity 1 and Entity 2, described as recipient created tax invoices (RCTIs) and recipient created adjustment notes (RCANs), as valid RCTIs and RCANs?

Answer

Yes. We attach a separate notice of decision confirming that the Commissioner will exercise his discretion pursuant to subsection 29-70(1B) of the GST Act to treat documents issued by Entity 1 (as of 1 July 20XX) and Entity 2 (as of 1 October 20YY), described as RCTIs and RCANs, as valid RCTIs and valid RCANs.

Relevant facts and circumstances

The parties:

Entity 1 is registered for GST.

Entity 2 is registered for GST.

Entity 1 and Entity 2 have entered into written RCTI agreements with each supplier with which they have a recipient created tax invoice (RCTI) and/or recipient created adjustment note (RCAN) arrangement.

Entity 1 and Entity 2 use a number of systems to process payments to suppliers. Each of these systems has a standard RCTI/RCAN format programmed it.

These RCTIs and RCANs were in use for several years prior to 1 July 20XX and processes for dealing with suppliers have not changed since the amendment of subsection 29-70(1) of the GST Act effective 1 July 20XX.

RCTI/RCANs issued by Entity 1 prior to 1 July 20XX were valid documents for the purposes of the GST law, but RCTI/RCANs issued by Entity 1 as of 1 July 20XX have not fully complied with the amended requirements for a tax invoice under subsection 29-70(1) of the GST Act.

RCTI/RCANs issued by Entity 2 have not fully complied with the amended tax invoice requirements as of 1 October 20YY.

System changes:

Entity 1 and Entity 2 conducted an internal review of documents issued by Entity 1 and Entity 2 in early 20ZZ.

That internal review revealed that documents described as RCTIs and RCANs do not include a statement that the GST is payable by the supplier, as required by subparagraph 29-70(1)(c)(vii) of the GST Act.

Systems change request are being process to correct the formatting of these documents so that they will contain the statement required under subsection 29-70(1)(c)(vii) of the GST Act.

Ruling request:

The primary submission in Entity 1's and Entity 2's ruling request refers to subsection 29-70(1) and 29-70(1B) as follows:

We advise that the omission of the statement required under subsection 29-70(1)(c)(vii) is due to an inadvertent oversight in the management changes required to be made in response to a change in GST law

We also consider that the inadvertent error is not due to reckless behaviour. Entity 1 and Entity 2 are aware of their taxation obligations and aim always to meet those obligations. However, in this particular case, the change in law was not fully understood and noted when the amended section 29-70(1) was introduced, leading to the failure to amend the format of the relevant document

The fact that we have now identified the issue and have initiated this request for exercise of a discretion in response to the issuance of GSTR 2013/1 demonstrates our commitment to monitoring ATO publications to identify when changes need to be made to systems and procedures.

We consider the recipient created tax invoices issued and recipient created tax invoice agreements are documents that combine to satisfy the requirements of subsection 29-70(1A) of the GST Act.

In the event you consider that Entity 1 and Entity 2 have not satisfied subsection 29-70(1A) of the GST Act, we request the exercise of the Commissioner's discretion under subsection 29-70(1B) to treat as a tax invoice particular documents issued by Entity 1 and Entity 2 since 1 July 20XX. The exercise of the discretion will also be required for a period until systems changes have been implemented to make the relevant document fully compliant with the relevant provision of the GST Act.

Examples of the following documents were provided as part of the ruling request:

· RCTIs issued by Entity 1

· RCTIs issued by Entity 2

· RCANs issued by Entity 1

· RCTI agreements created by Entity 1

Further information provided:

In a telephone conversation on dd/mm/yyyy, Entity 1 and Entity 2 advised that the RCTI agreements attached to the ruling request are standard templates used for both Entity 1 and Entity 2 and that all RCTI agreements are similar in construction, if not the same.

In a telephone conversation on dd/mm/yyyy, Entity 1 and Entity 2 advised that the system change requests were being processed, that testings were currently underway, that the process would be completed by dd/mm/yyyy, and that system changes required to meet the legislative requirements would be effective from dd/mm/yyyy.

In a telephone conversation on dd/mm/yyyy, Entity 1 and Entity 2 advised that the system change requests had not been completed, and that system changes required to meet the legislative requirements would require additional time.

In an email dated dd/mm/yyyy, Entity 1 and Entity 2 confirmed that the system changes used to manage issuance of RCTIs have been successfully implemented.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999, subsection 29-70(1)

A New Tax System (Goods and Services Tax) Act 1999, subsection 29-70(1A)

A New Tax System (Goods and Services Tax) Act 1999, subsection 29-70(1B)

Reasons for decision

Question 1

Summary

The recipient created tax invoices (RCTIs) issued by and RCTI agreements used by Entity 1 and Entity 2 are not documents that combine to satisfy the requirements of subsection 29-70(1A) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Detailed reasoning

Section 29-70 of the GST Act sets out the requirements for a valid tax invoice.

Subsection 29-70(1) of the GST Act states:

(1) A tax invoice is a document that complies with the following requirements:

a. it is issued by the supplier of the supply or supplies to which the document relates, unless it is a recipient created tax invoice (in which case it is issued by the recipient);

b. it is in the approved form;

c. it contains enough information to enable the following to be clearly ascertained:

i. the supplier's identity and the supplier's ABN;

ii. if the total price of the supply or supplies is at least $1,000 or such higher amount as the regulations specify, or if the document was issued by the recipient - the recipient's identity or the recipient's ABN;

iii. what is supplied, including the quantity (if applicable) and the price of what is supplied;

iv. the extent to which each supply to which the document relates is a taxable supply;

v. the date the document is issued;

vi. the amount of GST (if any) payable in relation to each supply to which the document relates;

vii. if the document was issued by the recipient and GST is payable in relation to any supply - that the GST is payable by the supplier;

viii. such other matters as the regulations specify;

a. it can be clearly ascertained from the document that the document was intended to be a tax invoice or, if it was issued by the recipient, a recipient created tax invoice.

It was stated in the ruling request

We advise that omission of the statement that the GST is payable by the supplier is the only deficiency of the documents.

We agree. The documents issued by Entity 1 and Entity 2 contain enough information to enable the following to be clearly ascertained:

i. The supplier's name and the supplier's ABN

ii. The recipient's name (i.e. Entity 1 or Entity 2) and the recipient's ABN

iii. What is supplied including the quantity and price

iv. The extent to which each supply to which the document relates is a taxable supply

v. The date the document is issued

vi. The amount of GST (if any) payable in relation to each supply to which the document relates.

The documents are in an approved form and the A New Tax System (Goods and Services Tax) Regulations 1999 do not specify any other requirements for tax invoices. In addition it can be clearly ascertained from the documents that the documents are RCTIs or RCANs.

However, those documents do not contain information to enable it to be ascertained that the GST is payable by the supplier. Consequently the documents do not satisfy the requirement in subparagraph 29-70(1)(c)(vii) of the GST Act for a valid tax invoice.

Subsection 29-70(1A) of the GST Act states that a document issued by an entity to another entity may be treated by the other entity as a tax invoice for the purpose of the GST Act if:

d. it would comply with the requirements for a tax invoice but for the fact that it does not contain certain information, and

e. all of that information can be clearly ascertained from other documents given by the entity to the other entity.

In relation to subsection 29-70(1A) it was submitted in the ruling request (page 3):

… there is an argument that the RCTI agreement is other documentation from which all of the information required by subsection 29-70(1) of the GST Act can be clearly ascertained by the entity that is receiving the RCTIs and RCANs from Entity 1 and Entity 2.

It was further submitted in the ruling request (page 4):

We consider that the recipient created tax invoices issued and recipient created tax invoice agreements are documents that combine to satisfy the requirements of subsection 29-70(1A) of the GST Act.

We disagree. Goods and Services Tax Ruling GSTR 2013/1 (GSTR 2013/1) states (Para 50) that, a recipient cannot treat a document that does not meet the RCTI requirements as a tax invoice by relying on other documents. Paragraph 50 of GSTR 2013/1 states:

... Subsection 29-10(1A) only allows the entity that receives a document to treat it as a tax invoice and, in the case of a recipient created tax invoice, it is the supplier that receives the document.

Therefore, Entity 1 and Entity 2 can not rely on subsection 29-70(1A) of the GST Act to combine the RCTIs or RCANs issued by and RCTI agreements used by Entity 1 and Entity 2 to satisfy the requirements of a valid tax invoice.

Question 2

We attach a notice of decision which confirms that the Commissioner will exercise his discretion pursuant to subsection 29-70(1B) of the GST Act to treat documents issued by Entity 1 (as of 1 July 20XX) and Entity 2 (as of 1 October 20YY), described as RCTIs and RCANs, as valid RCTIs and RCANs