3 Min. Read

What Is a Recipient Created Tax Invoice (RCTI)? Australian Taxation Guide

November 18, 2021

Tax invoices are a standard and essential element of the Australian Taxation System.

They’re a way to collect the tax revenue related to the goods and services related to GST. They’re also a way to record the credits that are claimable by businesses that are eligible.

Any business that has registered for GST must create and hold a tax invoice for any transaction. This is in order for an input tax credit to be claimed.

A tax invoice can normally only be issued by the entity that made the taxable supply. But there are certain circumstances where the receiver of the services or goods can generate an invoice.

This is what’s known as a recipient-created tax invoice. But what exactly is an RCTI and how are they beneficial in business? We’ll take a closer look at the definition and how to create one.

Here’s What We’ll Cover:

What Is a Recipient Created Tax Invoice?

When Can You Issue an RCTI?

How Do You Create a Recipient Created Tax Invoice?

Key Takeaways

What Is a Recipient Created Tax Invoice?

Tax invoices tend to be issued by whoever is supplying the goods or services. But in some certain cases, the recipient of the goods or services may actually create the tax invoice and send it to the supplier.

In Australia, this is known as a recipient created tax invoice, or RCTI.

It’s important to note that an RCTI can only be created and issued in a way that is approved by the Australian Taxation Office. These circumstances tend to be those where it is appropriate for the recipient of a supply to calculate or issue an invoice for commercial or practical reasons.

For example, it is common to create an RCTI for government grants and trade-in contracts.

When Can You Issue an RCTI?

There are a set of certain circumstances where you can issue an RCTI. Some of these circumstances include:

Both you and the supplier are registered for GST.
You and the supplier both agree that you may issue an RCTI and they won’t issue a tax invoice. This must be agreed in writing.
The agreement put in place is both current and effective when you issue the RCTI.
The type of product being sold are the type of goods or services that the ATO has decided can be invoiced using an RCTI.

In order to be valid, any RCTI must contain enough information to clearly lay out the requirements of tax invoices. It must also show the document is intended to be a RCTI and not simply a standard tax invoice.

How Do You Create a Recipient Created Tax Invoice?

As the customer receiving the goods or services, you would create a recipient created tax invoice in the same way as any other invoice. The only difference is that it will be labelled as a recipient created tax invoice.

If you’re looking to figure out how to create a valid tax invoice, be sure to try out our guide.