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Office of FINANCIAL SERVICES

Recipient Created Tax Invoices (RCTI)

What is a RCTI

Recipient Created tax invoices are issued by the recipient of the supply rather than by the supplier. A tax invoice is normally issued by the supplier. However sec 29-70(3) allows the Tax Commissioner to determine situations in which recipient created tax invoice (RCTI) can be issued

What are the classes of RCTI permitted by ATO

The general situations are specified in ATO Ruling GSTR 2000/10:

  • Supplies of agricultural products made to registered recipients who determine the value of the products after a qualitative or quantitative analysis
  • Supplies made to registered Government related entities
  • Supplies made to registered recipients that have an annual turnover (including input taxed supplies) of at least $20 million.
  • A specific situation for research grants can be applied under the A New Tax System (GST) Act 1999 Classes of RCTI Determination (No. 6) 2000:
    The Grantor who is the recipient of a taxable supply may issue a tax invoice for a taxable supply of research reports where the recipient establishes the value of the grant before the supply is made using a qualitative, quantitative or other evaluative process.

What are the requirements by ATO

Where the above (1) to (6) are met, the following requirements must be satisfied by recipients and suppliers

  • The supplier and the recipient must be registered for GST when the invoice is issued.
  • The recipient must set out in the tax invoice the ABN of the supplier.
  • 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
  • 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.
  • The recipient must reasonably comply with its obligations under the taxation laws’
  • The recipient and the supplier must have a written agreement specifying the supplies to which it relates, that it is current and effective when the RCTI is issued agreeing that:
  • The recipient must issue the tax invoices in respect of the specified supplies
  • The supplier will not issue tax invoices in respect of those supplies
  • The supplier acknowledges that it is registered when it enters the agreement and that it will notify the recipient if it ceases to be registered
  • The recipient acknowledges that it is registered when it enters the agreement and that it will notify the supplier if it ceases to be registered
  • The recipient indemnifies the supplier for any liability for GST and penalty that may arise from an understatement of the GST payable on any supply for which it issues a recipient created tax invoice
  • 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.

An RCTI must contain all the information required for a tax invoice, the words ‘recipient created tax invoice’ and the ABN of the supplier and the recipient must also be prominently stated.

University Procedure

A. Where Macquarie University makes a taxable supply and the recipient issues RCTI

To ensure that only valid and appropriate Recipient Created Tax Invoice (RCTI) arrangements are entered into, all RCTI agreements must be forwarded to Business Services Unit (BSU) for authorisation and counter signing and to facilitate the central recording of these arrangements by BSU.

(1) Where recipient entities have sent you a copy of their RCTI agreement for MU's signature

Complete only Section A of the RCTI request form (Word), so that BSU can later return a signed copy of the RCTI agreement to you. Attach the RCTI agreement to your completed Section A and forward them to BSU, for validation against GST legislation and signature

After validation, BSU will sign and send RCTI agreement to the recipient. A copy will be retained by BSU. BSU will send one copy to central record file and one copy back to the Division who requested the RCTI agreement based on the details in Section A of the RCTI agreement Form

After the agreement has been completed, the recipient can issue RCTI to the University. Divisions and Offices must ensure that no further tax invoice request is sent to BSU (Trade debtors Officer) to issue a tax invoice for any income received from the recipient under this agreement

A copy of RCTI must be attached to the Receipt Form to cashier when depositing your cheque with the University cashier. The University as a supplier has to keep the original or copy of the RCTI and any adjustment note for five years.

An RCTI agreement lapses after the specified period in the agreement. Should any early termination arise, Division/Offices must inform BSU, so that BSU can issue a termination advice to the recipient immediately when termination of the existing RCTI agreement is needed. Division/Offices are to fax termination advice to BSU at 9850 7279 or email Gwen.Lee@mq.edu.au

(2) Where you want to initiate a Macquarie University ’s RCTI agreement with your recipient of your taxable supply

Complete both Section A and B of the RCTI request form (Word) for BSU to prepare a RCTI agreement to your recipient. BSU will send the RCTI agreement to the recipient (Word) requesting signature and return of three signed copies to BSU Y6A.

On receipt of three signed copies, BSU retains one, sends one copy to Records and Archives for filing on central record file and one copy to the Division/Office.

Details of these arrangements are recorded in a central database in the Business Services Unit

After the agreement has been completed, the recipient can issue RCTI to the University. Divisions and Offices must ensure that no further tax invoice request is sent to BSU (Trade debtors Officer) to issue a tax invoice for any income received from the recipient under this agreement

A copy of RCTI must be attached to the Receipt Form to cashier when depositing your cheque with the University cashier. The University as a supplier has to keep the original or copy of the RCTI and any adjustment note for five years.

An RCTI agreement lapses after the specified period in the agreement. Should any early termination arise, Division/Offices must inform BSU, so that BSU can issue a termination advice to the recipient immediately when termination of the existing RCTI agreement is needed. Division/Offices are to fax termination advice to BSU at 9850 7279 or email Gwen.Lee@mq.edu.au

B. Where the supplier entity makes a taxable supply to Macquarie University and MU as the recipient issues RCTI

A ‘Recipient Created Tax Invoice’ can be issued for non-monetary consideration for a supply assuming they fall into the classes of invoices mentioned above. A consideration (payment) is not limited to a payment of money. It includes a payment in an ‘in-kind’ form such as:

  • Providing goods
  • Granting a right or performing a service (an act) and
  • Entering into an obligation.

For example, Macquarie University (MU) provides services of an in kind nature (such as laboratory facilities) to company XYZ in return for staff support provided by the company

The GST inclusive market value of the laboratory facilities from MU and the staff support from XYZ has been mutually agreed at the commencement of the grant at arms length at $11,000. Company XYZ must be registered for GST.

MU is making a laboratory facilities supply to XYZ for consideration equal to the market value of the staff support from XYZ. MU’s GST liability is 1/11th of $11K, the market value of the consideration (that is staff support received from XYZ)

XYZ is making a supply to MU of staff support for consideration equal to the market value of the laboratory facilities. Company XYZ’s GST liability is 1/11th of $11K, the market value of the consideration (that is the laboratory facilities from MU).

Both the University and the company are entitled to claim the input tax credit on their payments, establishing a revenue neutral result to the Tax Office for the tax period, provided the exchange of tax invoices takes place in the same tax period. To facilitate this, MU can enter into a Recipient Created Tax Invoice (RCTI) agreement with company XYZ, for their supply of staff support to MU Appendix 3-Request for MU's RCTI agreement (Word) and Appendix 4 –MU’s RCTI agreement to our supplier (Word).

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