FaCSIA Sheet 2: Recipient Created Tax Invoices (RCTIs)
- Aim of this FaCSIA Sheet
- What is a tax invoice?
- What is a RCTI?
- When would you expect to receive a RCTI?
- When would you expect to create a tax invoice?
- What are the benefits of having a RCTI sent to you?
- What regulatory requirements do you need to comply with, in order to receive a RCTI?
- What if you prefer to issue tax invoices rather than receive a RCTI from FaCSIA for regular funding Agreements?
- What information must a RCTI contain?
- How long should a RCTI be retained for?
- What if you issue a tax invoice for goods and services when a RCTI should have been issued?
- Further Information
Aim of this FaCSIA Sheet
The aim of this FaCSIA sheet is to enable service providers of FaCSIA to understand the meaning and operation of Recipient Created Tax Invoices (RCTI) within the context of the new GST system.Typically a supplier will issue a 'tax invoice' to an acquirer of a supply, to enable the acquirer to claim input tax credits (being the GST) paid on the acquisition of the supply.
In certain circumstances the acquirer of a supply, is able to generate the invoice for the supply. In this scenario the invoice is called a 'recipient created tax invoice'.
There are two main circumstances in which tax invoices are relevant for service providers. These are:
- recipient created tax invoices (RCTIs)
- tax invoices issued by the supplier
What is a tax invoice?
Under GST legislation, the general rule is that when a business purchase is made, and GST is charged, the supplier of the goods or services must provide a tax invoice if the purchase is more than $50 (GST exclusive). If the tax invoice complies with regulatory requirements it enables the purchaser to claim input tax credits on the GST paid.In terms of this general rule, FaCSIA in the case of grants or payments is considered to be 'the purchaser' or 'the recipient of the supplies' and you, the service provider, are 'the supplier'. Therefore under this rule, you would, as the supplier, be responsible for providing a tax invoice.
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What is a RCTI?
The general GST rule may be varied when taxable supplies are made to a registered government entity. In these circumstances the purchaser (the recipient of the supplies) may provide a RCTI. The recipient would want to do this where the value of the goods and services is determined by the recipient rather than the supplier, such as in the case of regular grants or payments made by a government department or agency.A RCTI operates as a substitute for tax invoice, not as an alternative.
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When would you expect to receive a RCTI?
If you receive regular funding from FaCSIA such as an annual or recurring grant, and you are registered for GST, FaCSIA expects you to agree to receiving a Recipient Created Tax Invoice.[ top ]
When would you expect to create a tax invoice?
Where FaCSIA currently pays for goods and services on the receipt of an invoice, (e.g. fee for service arrangements), and if you are registered for the GST, you are required to issue a tax invoice before payment is made.[ top ]
What are the benefits of having a RCTI sent to you?
Having a RCTI sent to you means you do not have to issue tax invoices to FaCSIA. This means that you do not have to set up new systems or amend current systems to generate tax invoices for the regular funding you receive from FaCSIA. You can expect to receive a RCTI for each individual payment from FaCSIA.You are still liable to remit 1/11th of the grant or payment to the ATO.
Like tax invoices, RCTIs are subject to regulatory and administrative requirements.
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What regulatory requirements do you need to comply with, in order to receive a RCTI?
FaCSIA (as the recipient), and you the supplier, must have a written agreement that is current and effective when the RCTI is issued.The agreements you are currently being offered include an RCTI. Where you have an existing agreement we will be seeking to vary this over the next few months.
The agreement must cover the following:
- that the contracting party authorises the recipient (FaCSIA) to issue tax invoices in respect of the supplies made to FaCSIA by the contracting party
- that you, the supplier will not issue tax invoices in respect of the supplies made to FaCSIA
- the supplier acknowledges that it is, registered for GST when it enters into the Agreement and will notify the recipient (FaCSIA) if it ceases to be registered (and if not registered then a RCTI does not apply)
- the recipient (FaCSIA) acknowledges that it is registered for GST when it enters into the Agreement and will notify the supplier (you) if it ceases to be registered for GST, or if it ceases to satisfy any of the requirements of the determination.
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What if you prefer to issue tax invoices rather than receive a RCTI from FaCSIA for regular funding Agreements?
FaCSIA' policy is that you must agree to receive a RCTI if you receive regular funding from FaCSIA. Exceptions to this may be granted by FaCSIA and will be considered on a case by case basis.[ top ]
What information must a RCTI contain?
A RCTI must contain all the requirements of a tax invoice plus the following information:- the words 'recipient created tax invoice' must be prominently shown on the document instead of just 'tax invoice'
- the RCTI will contain both the recipient's and the supplier's ABN.
How long should a RCTI be retained for?
An RCTI must be stored for five years.[ top ]
What if you issue a tax invoice for goods and services when a RCTI should have been issued?
If you issue a tax invoice in error the RCTI issued by FaCSIA will override that tax invoice.[ top ]