Explanatory Statement
Goods and Services Tax: Recipient Created Tax Invoice Determination (No. 24) 2016 for Covered Legal Services Obligation
General outline of determination
- This determination is made under subsection 29-70(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
- The determination allows a recipient of a taxable supply of a covered legal services obligation to issue recipient created tax invoices (RCTIs) to the supplier if the recipient determines the value of the taxable supply after the supply is made.
- The determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Date of effect
4. The determination commences on the day after registration.
What is this determination about:
5. Generally, tax invoices are issued by the entity that makes the supply under the GST Act.
6. The purpose of this determination is to outline a class of tax invoices that the Commissioner has determined may be issued by recipients of taxable supplies (called RCTIs). The Commissioner makes the determination by taking account a number of factors including the type of industry, the taxable supply, the GST turnover of the recipient and certain requirements for issuing RCTIs. The factors reflect a balance between facilitating the practical use of RCTIs by businesses and maintaining the integrity of the GST system.
7. In accordance with this determination, a recipient of a taxable supply of a covered legal services obligation may issue a RCTI for the supply if the recipient:
- establishes the value of the taxable supply after the supply is made; and
- satisfies the requirements set out in Clause 7 of the determination.
What is the effect of this determination
8. This determination allows a recipient of a taxable supply of a covered legal services obligation, to issue a RCTI for the supply provided the requirements of the determination are satisfied. As the recipient has the information to establish the value of the supply, issuing RCTIs will simplify payment and invoicing processes.
9. This determination is substantially the same as the previous determination that it replaces. Therefore, a recipient of a taxable supply of a covered legal services obligation who satisfied the previous determination will satisfy this determination and can continue to issue RCTIs under this determination.
10. Compliance cost impact: minor- there will be no or minimal impacts for both implementation and ongoing compliance costs. The determination is minor or machinery in nature.
Background
11. This determination replaces A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No. 6) 2001. The replaced instrument is repealed on commencement of this determination.
Consultation:
12. Section 18 of the Legislative Instruments Act 2003 specifically provides for circumstances where consultation may not be necessary or appropriate. One of those circumstances is where the instrument is considered minor or machinery in nature, and does not substantially change the law.
13. In this case, no further consultation has been undertaken in the development of this determination because there is no substantive change from the previous determination and it is considered minor or machinery in nature.
Legislative references:
A New Tax System (Goods and Services Tax) Act 1999
Legislative Instruments Act 2003
Timothy Dyce
Deputy Commissioner of Taxation
[24 February 2016]
Statement of compatibility with Human Rights
This statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Goods and Services Tax: Recipient Created Tax Invoice
Determination (No. 24) 2016 for Covered Legal Services Obligation
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
Generally, tax invoices are issued by a supplier under the basic rules for GST. This Legislative Instrument allows a recipient of a taxable supply of a covered legal services obligation to issue the tax invoice (called recipient created tax invoice) for the supply if the recipient determines the value of the taxable supply after the supply is made and all other requirements of the Instrument are satisfied. This will simplify the recipient’s invoicing and payment processes.
Human rights implications
This Instrument does not engage any of the applicable rights or freedoms. It allows for the streamlining of invoicing and payment practices.
Conclusion
This Instrument is compatible with human rights as it does not raise any human rights issues.
Overview
The Goods and Services Tax: Recipient Created Tax Invoice Determination (No. 24) 2016 was enacted to address the practical difficulties faced by recipients of taxable supplies, particularly in the context of covered legal services obligations, where the value of the supply is often determined after the supply is made. This legislative instrument, made under the authority of the A New Tax System (Goods and Services Tax) Act 1999, enables recipients to issue recipient created tax invoices (RCTIs) under certain conditions, thereby facilitating more streamlined invoicing and payment processes. The determination reflects a balance between practical business needs and the integrity of the GST system, as it considers factors such as the industry type, the nature of the taxable supply, and the recipient's GST turnover. The policy objective is to reduce administrative burdens and compliance costs while ensuring the GST system remains robust. This determination was made by the Commissioner of Taxation and is a legislative instrument under the Legislative Instruments Act 2003, and it has been determined that no further consultation was necessary due to its minor and machinery nature, with no substantive changes from the previous determination.
Scope and Application
The Goods and Services Tax: Recipient Created Tax Invoice Determination (No. 24) 2016 for Covered Legal Services Obligation applies to recipients of taxable supplies of covered legal services obligations, allowing them to issue recipient created tax invoices (RCTIs) if they determine the value of the taxable supply after the supply is made. This provision is intended to simplify invoicing and payment processes for recipients who have the necessary information to establish the value of the supply. The determination applies nationally as it is made under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which has jurisdiction throughout Australia. The determination replaces a previous one, and businesses that complied with the previous requirements will satisfy the new ones, allowing them to continue issuing RCTIs. This legislative instrument is considered minor or machinery in nature, with no substantive changes from the previous determination, and does not engage any of the applicable rights or freedoms, thereby being compatible with human rights as it does not raise any human rights issues.
Key Provisions
The Goods and Services Tax: Recipient Created Tax Invoice Determination (No. 24) 2016 (the Determination) is a legislative instrument made under subsection 29-70(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). This Determination allows a recipient of a taxable supply of covered legal services obligations to issue a recipient created tax invoice (RCTI) to the supplier if the recipient determines the value of the taxable supply after the supply is made (section 7). This Determination is designed to streamline the invoicing and payment processes for the recipient by allowing them to issue an RCTI, provided they meet the specific requirements set out in Clause 7. The Determination specifies that the RCTI can only be issued if the recipient has established the value of the taxable supply after the supply is made and satisfies all other requirements of the Determination (section 7).
The Determination imposes several obligations and requirements on parties issuing RCTIs under its provisions. Firstly, the recipient must determine the value of the taxable supply after the supply is made (section 7). Secondly, the recipient must ensure that the RCTI complies with all the requirements outlined in Clause 7 of the Determination, which include but are not limited to, providing specific details such as the date of the supply, the description of the supply, the value of the supply, and the GST amount (section 7). Furthermore, the recipient must maintain records that substantiate the details provided on the RCTI, such as the value of the supply, to ensure compliance with the GST Act (section 7).
The Determination does not explicitly state any specific offences or penalties for breach. However, under the GST Act, there are general provisions that may apply to breaches related to tax invoices, including RCTIs. For example, under section 28-10 of the GST Act, a person who contravenes any provision of the GST Act in relation to tax invoices may be subject to a civil penalty of up to $2,220 for individuals and $11,100 for corporations. Additionally, if the breach is considered to be deliberate, the penalties can be significantly higher. The GST Act also provides for criminal penalties, including fines and imprisonment, for serious or repeated breaches. The exact penalties depend on the nature and severity of the breach, and the discretion of the court.
In summary, the Goods and Services Tax: Recipient Created Tax Invoice Determination (No. 24) 2016 allows recipients of taxable supplies of covered legal services obligations to issue RCTIs if they determine the value of the supply after the supply is made and satisfy all other requirements. The Determination imposes obligations on the recipient to determine the value of the supply, issue a compliant RCTI, and maintain records to substantiate the details on the RCTI. While the Determination itself does not specify penalties, breaches may be subject to civil and criminal penalties under the GST Act, depending on the nature and severity of the breach.