Recipient Created Tax Invoices (RCTIs) are a fundamental process in the brokerage industry. It is important to have a wholistic understanding of RCTIs as they are a legal obligation outlined by the Australian Taxation Office (ATO). However given the regulatory nature of this tax invoice it is important not to confuse the generic legal outlines with those that are specific to the finance industry.
What is an RCTI?
All businesses registered for GST are required to provide a tax invoice for any transaction in order for an input tax credit to be claimed. This invoice is generally only issued by the party that provided the taxable supply, however, some circumstances, where, in order to input credit claims, the recipient of the good or service can generate the tax invoice. This is the RCTI.
It is pertinent however, to note that an RCTI can only be created if they meet ATO guidelines set out to define as to when an RCTI is required.
When to use an RCTI?
With regards to the finance industry, RCTIs are simply a form of tax invoice created by the recipient when:
- an invoice is yet to be sent by the supplier, or;
- a means to add value to the business by creating the invoice on behalf of the supplier.
Requirements when issuing an RCTI
There are many guidelines and provisions set out by the ATO outlining what circumstance requires an RCTI. The basic boxes that must be checked when creating an RCTI are as follows:
- you and the supplier are both registered for GST
- you and the supplier agree in writing that you may issue an RCTI and they will not issue a tax invoice
- the agreement is current and effective when you issue the RCTI
- the goods or services being sold under the agreement are of the type that the ATO has determined can be invoiced using an RCTI.
In addition to the above, the purchaser’s ABN or identity must be detailed in the agreement/RCTI.
The recipient (creator of the RCTI) is also required to:
- issue the original or a copy of the RCTI to the supplier within 28 days of one of the following dates
- the date of the sale
- the date the value of the sale is determined
- retain the original or a copy of the RCTI
- comply with your obligations under the tax laws.
Legislative provisions
The RCTI process may seem like another mundane, time consuming business process, but there are a variety of legal implications set out by the Australian Taxation Office that must be followed.
The primary legal schedule discussing RCTIs is the Goods and Services Tax Ruling 2000/10 (GSRT 2000/10).
The three broad classes of RCTIs outlined in paragraph 10 of this piece of legislation are as follows:
- (a) tax invoices for taxable supplies of agricultural products made to registered recipients who:
- (i) satisfy the requirements for issuing RCTIs, and
- (ii) determine the value of the agricultural products (and any by-products) subsequent to, and dependent upon, quantitative or qualitative analysis of the supply being undertaken (see paragraphs 22 to 24 of this Ruling);
- (b) tax invoices for taxable supplies made to registered government related entities that satisfy the requirements for issuing RCTIs (see paragraphs 25 to 27 of this Ruling); and
- (c)tax invoices for taxable supplies made to registered recipients that satisfy the requirements for issuing RCTIs and that:
- (i) have a GST turnover (including input taxed supplies) of at least $20 million annually; or
- (ii) are members of a group of companies, partnerships or trusts, or a joint venture operator, in which one or more other members of that group or participants in that joint venture have such a GST turnover.
These three classes come with an implication that the recipient will be providing the tax invoice.
Assist Commission RCTIs
Where Escientia Assist Commission’s relevancy lies is within Section 11. This paragraph of the act outlines that if you do not fall into the categories outlined by section 10 then a written agreement between parties is required, expressly stating that the recipient will provide the invoice.
Click the link below to learn how Assist Commission simplifies the generation of RCTIs.