If you regularly buy from suppliers but you’re the one who calculates the price (for example, you run a marketplace, agency or processing facility), a recipient‑created tax invoice (RCTI) can make your accounts flow much more smoothly.
Used correctly, RCTIs save time, reduce back‑and‑forth over invoices and help you stay GST compliant. Used incorrectly, they can lead to GST mistakes, unhappy suppliers and potential penalties.
In this guide, we’ll break down what RCTIs are, when you can use them in Australia, the rules you need to follow, and the practical steps to set them up properly with your suppliers.
What Is A Recipient‑Created Tax Invoice (RCTI)?
An RCTI is a tax invoice that’s issued by the recipient of a taxable supply, rather than the supplier. In plain English: you buy something from a supplier, but you create the invoice on their behalf and send it to them.
RCTIs are common where the recipient is best placed to determine the price or quantities (think harvesters buying grain by weight, marketplaces calculating commissions, or agencies reconciling media spend). Because you set the value, you also generate the invoice and handle the GST treatment.
Done right, RCTIs streamline billing, improve accuracy and reduce disputes. They also work hand‑in‑hand with clear Terms of Trade that spell out pricing, commissions, deductions and how and when you’ll pay.
When Can You Use An RCTI And What Are The Rules?
You can’t just switch to RCTIs because it’s convenient-you need to meet specific conditions set out in Australian GST law and ATO determinations. At a high level, you can issue RCTIs if all of the following are true.
- You and your supplier are both registered for GST at the time of issuing the RCTI and making the supply.
- There’s a written agreement (or contract) between you and the supplier that allows you to issue RCTIs.
- You, as the recipient, determine the value of the supply (for example, by weighing product, calculating usage or running a system of record).
- Your agreement requires the supplier not to issue their own tax invoices for those supplies.
- You issue the RCTI within the required timeframe (typically within 28 days of determining the amount or of any adjustment).
- The RCTI contains all mandatory tax invoice details and the required RCTI statements.
The written agreement doesn’t need to be complicated, but it must include the essential RCTI clauses, including that:
- Both parties are registered for GST when the RCTI is issued.
- The recipient will issue the RCTIs and the supplier will not issue tax invoices for these supplies.
- Each party will notify the other if their GST registration status changes.
- Adjustments will be handled via adjustment notes (credit/debit) within the required timeframe.
It’s important to have these obligations embedded in the right place-often alongside your pricing, payment and deduction terms-so they operate consistently with your broader commercial deal. Many businesses include these terms in their master Supply Agreement or supplier onboarding pack.
How To Set Up RCTIs With Your Suppliers (Step‑By‑Step)
1) Map When RCTIs Make Sense
Start by identifying the supplies where you determine the value (for example, by weight, platform data or throughput). That’s typically where RCTIs deliver the most benefit and are supported by the ATO framework.
2) Confirm GST Registration
Check and record your suppliers’ GST registration status before switching them to RCTIs. Keep evidence on file and re‑confirm if there’s any change. If a supplier isn’t registered for GST, you cannot issue an RCTI for their supplies.
3) Put A Written RCTI Agreement In Place
Embed the RCTI clauses into your supplier contract or onboarding terms. This is also where you should cover pricing, how amounts are calculated, what deductions you may make (for example, commissions or fees) and payment timing. Strong Terms of Trade and a clear Supply Agreement go a long way to preventing disputes and keeping your tax treatment consistent with the commercial deal.
4) Set Up Your Billing And Data Sources
Because RCTIs rely on your calculation of the value, make sure your data inputs (weights, usage, platform metrics) are accurate, auditable and retained. This is essential for compliance and will help if an issue is raised by a supplier or the ATO.
Your RCTI template must include all mandatory tax invoice details (we list them below) and the required RCTI statements. Build this into your billing system so it’s automatic and consistent.
6) Issue RCTIs On Time (And Handle Adjustments)
Issue the RCTI within 28 days of determining the value. If something changes (for example, a weight correction or a pricing error), issue an adjustment note within 28 days of becoming aware. Keeping your process timely is part of staying compliant and maintaining supplier trust.
7) Align Payment Terms And Cash Flow
RCTIs and payment terms go hand‑in‑hand. Make sure the timing, method and any deductions are clear and lawful. If you charge late fees, ensure they’re compliant with Australian law-our guidance on late payment fees can help you set this up properly. It’s also wise to document your invoice payment terms in writing so everyone is on the same page.
What To Include And How To Stay Compliant
Mandatory Details To Include On An RCTI
To be valid for GST purposes, an RCTI needs to include all the standard tax invoice details plus the specific RCTI statements. Make sure your template has the following:
- The words “Recipient‑Created Tax Invoice” prominently displayed.
- Your business name and ABN (as the recipient issuing the invoice).
- The supplier’s business name and ABN.
- The date of issue.
- A description of the supply, including quantity and price.
- The GST amount payable (or a clearly stated amount that includes GST) and that the total is inclusive/exclusive of GST as relevant.
- The extent to which the supply is taxable (for example, fully taxable, GST‑free or mixed).
- The required RCTI statement that the invoice was issued by the recipient and that the supplier should not issue a tax invoice for this supply.
Timing Rules You Should Follow
- Issue the RCTI within 28 days of determining the value of the supply.
- If you identify an adjustment (for example, a corrected weight or rate), issue an adjustment note within 28 days of the change.
- Stop issuing RCTIs immediately if either party ceases to be GST‑registered (and update your agreement and processes accordingly).
Record‑Keeping: What To Keep And For How Long
Keep copies of all RCTIs and adjustment notes, plus the data and calculations that support the values (for example, weighbridge tickets, platform reports or usage logs). In Australia, you generally need to retain tax records for at least five years.
If you collect or store supplier information (names, ABNs, contact details, bank details), ensure you have a compliant Privacy Policy and handle the data in line with the Privacy Act.
Handling Commissions, Offsets And Deductions
It’s common to deduct agreed fees or commissions on an RCTI. Spell these out clearly in your supplier contract and on the invoice itself so there are no surprises. Where you extend trade credit to suppliers, consider credit terms and, in some cases, taking security. A General Security Agreement and registering on the PPSR may be appropriate if the commercial relationship involves significant receivables or equipment.
What Legal Documents Support RCTIs?
RCTIs work best when they sit within a clear, well‑drafted contract suite. The right documents help you manage GST obligations, payment timing and risk with your suppliers.
- Supply Agreement: Sets out pricing, how you determine amounts, when you pay, and includes the RCTI clauses.
- Terms of Trade: Covers ordering, delivery/acceptance, deductions, invoicing and dispute escalation, and can incorporate your RCTI process by reference.
- Credit Application Terms: If you extend trade credit, these terms address limits, security and consequences of late payment in a structured way.
- Privacy Policy: Explains how you collect, use and store supplier information gathered as part of your RCTI/billing process.
- Contractor Agreement: If you also engage independent contractors, keep their payment and tax treatment separate and clear (RCTIs apply to taxable supplies, not employment).
If you operate a marketplace or platform, your platform terms may also need to reflect who invoices whom, how fees are calculated and whether you use RCTIs for commissions. If you’d like help tailoring these, our team can step in so your commercial flow and legal documents align.
Key Takeaways
- RCTIs let the recipient of a supply issue the tax invoice, which is useful when you’re the one who determines the price or quantity.
- You can use RCTIs if both parties are GST‑registered, there’s a written agreement with the required clauses, and you issue compliant invoices on time.
- Build RCTI terms into your supplier contracts, align them with clear payment terms, and keep accurate supporting data for each invoice.
- A compliant template must include all mandatory tax invoice details plus the required RCTI statements-configure this in your billing system.
- Strong contracts and policies-such as a Supply Agreement, Terms of Trade, Credit Application Terms and a Privacy Policy-support smooth, compliant RCTI processes.
- If you handle commissions, deductions or credit, ensure they’re clearly documented and consider security where appropriate (for example, a General Security Agreement and PPSR registration).
If you’d like a consultation on setting up recipient‑created tax invoices for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.
