Edited version of your private ruling

Authorisation Number: 1012505378710

Ruling

Subject: GST and approval to issue recipient created tax invoices (RCTIs) by scrap metal dealers

Question

Are you allowed to issue RCTIs to your suppliers of scrap metal (clients)?

Answer

Yes, under the RCTI Determination (No 29) 2000, you are allowed to issue RCTIs to your clients.

Relevant facts and circumstances

You purchase scrap metal from different suppliers, sort it and sell it to large scale scrap metal dealers. You determine the value of the scrap metal purchased.

For the last financial year, you turnover was less than one million dollar.

As per our records, you are registered for GST.

As you determine the value of scrap metal purchased, you tried to issue RCTIs to your clients. You have provided us a copy of a sample RCTI.

You have been told by the Australian Taxation Office (ATO) that you cannot issue RCTIs, without having proper authority through a private ruling.

You want the Commissioner to issue a private ruling authorising you to issue RCTIs to your clients.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) – subsection 29-70(3)

Reasons for the decision

Subsection 29-70(3) of the GST Act provides that 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.

Under subsection 29-70(3) of the GST Act and subsection 4(1) of the Acts Interpretation Act 1901, the Commissioner has issued a determination, which may be cited as the A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No. 29) 2000.

As per clause 3 of the determination, this determination applies to an entity not determined previously as being able to issue a tax invoice belonging to a class of tax invoices that may be issued by a recipient.

As per clause 4 of the determination, a scrap metal dealer who is the recipient of a taxable supply, may issue a tax invoice that belongs to a class of tax invoices for a taxable supply of scrap metal where the recipient:

(i) establishes the value of those products after the supply is made using a qualitative or quantitative process; and

(ii)   satisfies the requirements set out in clause 5;

We consider that, as a scrap metal dealer, you are eligible to issue tax invoices that belong to a class of tax invoices for a taxable supply of scrap metal received by you. However, you must satisfy the requirements as listed under clause 5 of the determination. The requirements are listed below.

5. A recipient must satisfy the following requirements:

(a)  the recipient must be registered for GST when the invoice is issued;

(b)  the recipient must set out in the tax invoice the ABN of the supplier;

(c)  the recipient must issue the original or a copy of the tax invoice to the supplier within 28 days of making, or determining, the value of a taxable supply and must retain the original or the copy;

(d)  the recipient must issue the original or a copy of an adjustment note to the supplier within 28 days of the adjustment and must retain the original or the copy;

(e)  the recipient must reasonably comply with its obligations under the taxation laws;

(f)  the recipient must have either:

· a written agreement with the supplier specifying the supplies to which it relates, that is current and effective when the RCTI is issued, agreeing that:

(i)  the recipient can issue tax invoices in respect of the supplies;

(ii)  the supplier will not issue tax invoices in respect of the supplies;

(iii)  the supplier acknowledges that it is registered for GST when it enters into the agreement and that it will notify the recipient if it ceases to be registered;

(iv)  the recipient acknowledges that it is registered when it enters into the agreement and that it will notify the supplier if it ceases to be registered for GST; and

(v)  the recipient indemnifies the supplier for any liability for GST and penalty that may arise from an understatement of the GST payable on any of the specified supplies received on a tax invoice the recipient issues; or

·  an agreement with the supplier embedded in an RCTI it issues that contains 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 recipient if it ceases to be registered. The recipient acknowledges that it is registered for GST and that it will notify the supplier if it ceases to be registered for GST. The recipient indemnifies the supplier for any liability for GST and penalty that may arise from an understatement of the GST payable on any of the specified supplies received on a tax invoice the recipient issues. Acceptance of this RCTI constitutes acceptance of the terms of this written 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

(g)  the recipient must not issue a document that would otherwise be a recipient created tax invoice, on or after the date when the recipient or the supplier has failed to comply with any of the requirements of this determination.

(h)  if the recipient has a current GST turnover of less than $1,000,000, it must notify the Commissioner in writing of the recipient's intention to use recipient created tax invoices. This notification must be made before 14 days have elapsed after the first occasion that a recipient created tax invoice is issued by that recipient.

Your GST turnover is less than $1,000,000. We consider that you have notified the Commissioner in writing of your intention to use recipient created tax invoices.

Provided you satisfy all the above requirements, in future you will be eligible to issue RCTIs to your clients.

Please note that we have enclosed a copy of the A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No. 29) 2000 for your perusal.