Goods and Services Tax: Recipient Created Tax Invoice Determination (No. 41) 2016 for Australian Financial Services Licensees and their Representatives

General Outline of determination

1. The determination is made under subsection 29-70(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
2. Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any determination of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such determination.
3. The determination allows an Australian financial services (AFS) licensee, or a representative of an AFS licensee to issue recipient created tax invoices (RCTIs) in certain circumstances.
4. The determination is a legislative instrument for the purposes of the Legislation Act 2003.

Date of effect

5.      The determination commences on the day after registration.

6.      The determination applies retrospectively from 1 April 2016 which is when A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No.33) 2000 (the previous determination) expired.

7.      The retrospective application of the determination does not have an adverse effect on the rights or liabilities of any person.[1]  The purpose for the retrospective application is to ensure that RCTIs that were issued in the circumstances outlined in the determination, but before its registration, are valid and taxpayers are not disadvantaged as result of sunsetting of the previous determination.

What is the determination about

8.  Generally, under the GST Act, tax invoices are issued by the entity that makes the taxable supply.

9. The purpose of the determination is to outline a class of tax invoices (called RCTIs) that the Commissioner has determined may be issued by recipients of taxable supplies. The Commissioner makes the determination by taking account a number of factors including the type of industry, the taxable supply, 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.

10. In accordance with the determination, an AFS licensee or a representative of an AFS licensee that is a recipient of a taxable supply of a financial planning service provided to a client on their behalf, may issue an RCTI for the taxable supply if the AFS licensee or representative:

• establishes the value of the taxable supply; and
• satisfies the requirements set out in Clause 8 of the determination.

What is the effect of the determination

11. The effect of the determination is to streamline payment and invoicing processes by allowing the recipient that has the information to establish the value of the taxable supply, to issue the tax invoice.

12. The determination is substantially the same as the previous determination that it replaces but it takes account of the legislative changes governing the licensing of financial planners that came into force on 11 March 2002. An entity that satisfied the requirements of the previous determination and that has acquired the relevant AFS licensing or is a representative of an AFS licensee, will generally satisfy the requirements of the determination.

13.  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

12. The determination replaces A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No. 33) 2000, which is no longer in force.

Consultation:

 13. Subsection 17(1) of the Legislation Act 2003 requires, before the making of a determination, that the rule-maker is satisfied that appropriate and reasonably practicable consultation has been undertaken.

14. The Australian Taxation Office (ATO) conducted consultation with key stakeholders from January 2016 to July 2016 including the Financial Planning Association of Australia (FPA) and Financial Services Council (FSC). As representatives of the taxpayers affected by the determination, the ATO considered the feedback and issues raised by FPA and FSC and made changes to the determination where appropriate.

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.41) 2016 for Australian Financial Services Licensees and their Representatives.

The 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. The Legislative Instrument allows an Australian Financial Services (AFS) licensee or a representative of an AFS licensee that is a recipient of a taxable supply of a financial planning service to a client on their behalf to issue the tax invoice (called a recipient created tax invoice) subject to a number of provisos. This includes if the supplier is an AFS licensee or a representative of an AFS licensee as well. Further the AFS licensee or the representative that issues the RCTIs must determine the value of the taxable supply and satisfy the other requirements of the Legislative Instrument. This will simplify invoicing and payment processes.

Human rights implications

The Instrument does not engage any of the applicable rights or freedoms. It allows for the streamlining of invoicing and payment practices.

Conclusion

The Instrument is compatible with human rights as it does not raise any human rights issues.

[1] Subsection 12(2) of the Legislation Act 2003 provides that a retrospective legislative instrument (or provision of that instrument) will be of no effect if it applies to adversely affect the rights or liabilities of any person other than the Commonwealth or an authority of the Commonwealth.