Edited version of your written advice

Authorisation Number: 1051328039755

Date of advice: 24 January 2018

Ruling

Subject: Recipient created tax invoices

Question

Can you issue recipient created tax invoices (RCTIs) for the selling agent services supplied by your agents?

Answer

Yes. You may choose to issue RCTI for the selling agent services supplied by your agents. The selling agent services supplied by your agents should be the collection and delivery of purchase orders by the agents. To the extent services supplied by your agents are not considered as collection and delivery of purchase orders you are not entitled to issue RCTIs.

Relevant facts and circumstances

You have successfully developed and commercially marketed a software product (the Product).

You have a very broad spectrum of agents who are reselling the Product, and referring you to new customers.

The agents may also undertake professional services on behalf of you and be in a third-party revenue share agreements with you.

You and all of your agents are registered for GST.

The supplies by the agents to you are taxable supplies in Australia.

The agents are rewarded each month by the volume of the sales, the referral volume, as well as any professional services provided on your behalf.

The rate of the commission paid to the agents is based on the agreement between you and the agents subject to the products and the number of product packages sold.

The rate also is determined by you in accordance with the life cycle and quality of the businesses referred by the agents.

You have the ultimate right to determine the rate of the commission and ultimately the amount of the payments to your agents.

You are focusing on the promotion of its partnership relationship with the agents and future business with any potential agents. It is expected that there will be a growth in commissions which will continue to increase significantly in the future.

To claim the input tax credits associated with the commissions paid to the agents you must possess valid tax invoices from the agents.

The communication with each individual agent in relation to commission to be paid, and the timing getting the valid tax invoices from the agents has a negative impact on your administrative process.

In addition, this process of issuing the monthly invoice to you is very time consuming and complex for each of the agents as they must rely on you to collect the necessary information such as the number of the Products sold and amounts of commission. This process can involve back and forth

correspondences and as a result cause inaccuracy in the invoices issued in some cases.

You are in the process of renewing the agreements with the agents.

It is your intention to reach an agreement with the agents so that you will generate the invoices on behalf of each agent with respect to the commissions to be paid. Resultantly, the administrative burden and complexity for all parties is mitigated.

The invoices to be generated by you will comply with the requirements under subsection 29-70(1) of A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

The agreement between you and the agents will detail the arrangement that you will generate the tax invoices on behalf of the agents and the terms for payments.

You will comply with the requirements set out in paragraphs 7, 8 and 9 of the Goods and Services Tax: Recipient Created Tax Invoice Determination (No. 14) 2016 for Selling Agent Services (RCTI 2016/14).

In addition, you use a standard calculation process and the Service Agreement between you and the agents to compute the GST in relation to the services provided by the selling agents.

The services provided by the agents come within the meaning of ‘selling agent services’ as defined in paragraph 10 of RCTI 2016/14.

Relevant legislative provisions

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

Reasons for decision

Subsection 29-70(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) defines a recipient created tax invoice (RCTI) 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.

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

Accordingly, under subsection 29-70(3), the Commissioner has determined that three broad classes of RCTIs may be issued by taxpayers. These three broad classes are outlined in paragraph 10 of Goods and Services Tax Ruling, Goods and services tax: recipient created tax invoices (GSTR 2000/10). You do not fall into these three categories. However, at paragraph 11 of GSTR 2000/10 the Commissioner provides that applications for determinations may be lodged by other clients in respect of other classes of invoices. Accordingly, the Commissioner has issued several determinations for other classes of recipient created tax invoices. One such determination is the Goods and Services Tax: Recipient Created Tax Invoice Determination (No. 14) 2016 for Selling Agent Services (RCTI 2016/14).

Under RCTI 2016/14, a seller who is a recipient of a taxable supply of selling agent services, may issue a tax invoice called a recipient created tax invoice (RCTI) for the taxable supply if the seller:

a) establishes the value of the taxable supply after the supply is made using a calculation process; and

b) satisfies the requirements set out in Clause 7 of RCTI 2016/14.

RCTI 2016/14 provides the following explanations in regards to these requirements and the type of selling agent services for which the Commissioner has determined that RCTIs are appropriate to be issued.

calculation process means any process used by the seller to calculate the commission or payment to the selling agent.

purchase orders means any order or request for goods or services.

seller means the entity that will satisfy the purchase order through the supply of goods or services.

selling agent means any entity that is authorised by the seller to accept purchase orders on behalf of the seller.

selling agent services means the collection and delivery of purchase orders by a selling agent to a seller.

Based on the information that have been provided we are of the view that you satisfy these requirements. Accordingly, you may choose to issue RCTI for the selling agent services (that is, the collection and delivery of purchase orders) supplied by the agents. To the extent the services supplied by the agents are not considered as collection and delivery of purchase orders you are not entitled to issue RCTIs. If your agents supply you with any other service other than selling agent services (as defined in RCTI 2016/14), you are not entitled to issue RCTIs for these services.