Recipient Created Tax Invoices (RCTI) Explained
Short answer
A recipient created tax invoice is a tax invoice issued by the buyer instead of the seller. It is only valid where both parties are registered for GST, the supply is one the ATO allows RCTIs for, and a written agreement was in place before the first RCTI was issued. Get any of those wrong and the document is not a valid tax invoice, which puts the GST credit at risk.
RCTIs exist because in some industries the buyer is the only party who knows what the supply was worth. A grain handler weighs and grades the delivery. A scrap metal processor sorts and values the load. The farmer or the collector cannot write an accurate invoice until after the buyer has assessed it — so the ATO permits the buyer to issue the invoice instead.
When an RCTI is allowed
Three conditions all have to be met.
1. Both parties are registered for GST. Not one of them. If the supplier is not registered, there is no GST on the supply and no RCTI to issue.
2. The supply is within a permitted class. The ATO sets out which supplies RCTIs can be used for through a determination. In broad terms, these are situations where the recipient determines the value of the supply — agricultural products, scrap metal, certain commission and government arrangements, and supplies where the recipient satisfies specified requirements about record keeping and GST compliance. Check the current determination against your particular arrangement rather than assuming an industry is covered.
3. A written agreement exists first. The agreement has to be in place before the first RCTI is issued, not backdated after an auditor asks for it.
What the written agreement must say
The agreement can be a standalone document or clauses inside the supply contract. Either way it needs to record that:
- The recipient can issue tax invoices for the supplies covered
- The supplier will not issue tax invoices for those supplies
- The supplier is registered for GST and will notify the recipient if that changes
- The recipient is registered for GST and will notify the supplier if that changes
- Both parties accept the terms, evidenced by signature or equivalent acceptance
The agreement should also identify the supplies it covers. An agreement written for monthly produce deliveries does not extend to an unrelated one-off equipment sale from the same supplier.
What every RCTI must show
An RCTI carries everything an ordinary tax invoice carries, plus a little more, because two ABNs are now relevant instead of one.
- The words "Recipient created tax invoice" — the document must identify itself as one
- The supplier's identity and ABN
- The recipient's identity and ABN
- The date of issue
- A description of what was supplied, including quantity where relevant
- The amount payable, and the GST amount or a statement that the total includes GST
One detail catches people out: the document must not be worded as though the supplier issued it. A buyer's system that generates an invoice with the supplier's letterhead and no RCTI wording has produced a document that is not a valid tax invoice for anyone.
Who reports what
Issuing an RCTI changes who prepares the paperwork, not who owes or claims the GST.
The recipient claims the GST credit on the purchase and holds the RCTI as the substantiating document. The supplier reports the GST on the sale in its own BAS, using the copy of the RCTI it was given. Both parties keep records for five years.
If the value later changes — a rejected load, a price adjustment, a quantity correction — the recipient issues a recipient created adjustment note. The supplier does not issue a credit note for a supply covered by an RCTI agreement.
Where RCTI arrangements go wrong
The rules themselves are stable. Failures come from the arrangement drifting after it was set up.
The agreement was never signed. Someone in operations started issuing RCTIs because that is how the industry works, and the document was left as a draft or never sent for signature.
The supplier deregistered. GST registration is not permanent. A supplier that cancels its registration is still receiving RCTIs with GST on them, because nobody rechecked ABN Lookup.
Both parties invoiced. The supplier's accounting software also issued an invoice, so the purchase is recorded twice and the GST credit is claimed twice.
The agreement is not filed with the transactions. The RCTIs are in the ledger, the agreement is in a folder on someone's desktop, and at audit only one of the two can be produced.
RCTI compliance checklist
Run through this when setting up a new arrangement, and again annually.
- Both parties are registered for GST, verified on ABN Lookup at the start of the arrangement
- The supply falls within a class of supplies for which the ATO permits RCTIs
- A written RCTI agreement is signed and dated before the first RCTI is issued
- The agreement states that the recipient can issue tax invoices for the supply
- The agreement states that the supplier will not issue tax invoices for that supply
- The agreement states that the supplier is registered for GST and will notify the recipient if it ceases to be
- The agreement states that the recipient is registered for GST and will notify the supplier if it ceases to be
- Each RCTI is clearly labelled 'Recipient created tax invoice'
- Each RCTI shows both the supplier's and the recipient's identity and ABN
- Each RCTI shows the date, a description of the supply, the amount and the GST
- A copy of every RCTI is given to the supplier and retained by the recipient
- Adjustments are issued as recipient created adjustment notes, not supplier credit notes
- The agreement and every RCTI are retained for five years
The most valuable habit here is attaching the signed agreement to the supplier record in your accounting system, not just filing it. An RCTI on its own does not prove the arrangement was valid — the agreement is what does that, and it is the document nobody can find three years later. For the broader substantiation rules, see how to substantiate GST credits in Australia.
Frequently asked questions
What is a recipient created tax invoice?
An RCTI is a tax invoice issued by the buyer rather than the seller. The buyer works out the value of what was supplied, issues the invoice on the supplier's behalf, and both parties use that document for GST purposes.
When can I issue an RCTI?
Only where the ATO allows it. Both parties must be registered for GST, there must be a written agreement in place before the first RCTI is issued, and the supply must fall within a class the ATO permits — broadly, situations where the buyer determines the value, such as agricultural produce, scrap metal, or certain government and commission arrangements.
Do I need a written agreement?
Yes. A written RCTI agreement must exist before the first RCTI is issued. It can be a standalone document or embedded in the supply contract, provided it contains the required statements and both parties have agreed to it.
What must an RCTI show?
Everything a normal tax invoice shows, plus the buyer's identity and ABN, the supplier's identity and ABN, and the statement that the document is a recipient created tax invoice being issued by the recipient. It must not state that the supplier issued it.
Who claims the GST credit?
The buyer claims the GST credit, as with any purchase. The supplier still reports the GST on the sale in its own BAS — issuing an RCTI does not shift the supplier's reporting obligation.
What happens if the supplier stops being registered for GST?
The RCTI arrangement stops. The buyer cannot issue a valid RCTI to a supplier that is not registered for GST, and any credit claimed on one issued after that point is not supportable. Check the supplier's registration on ABN Lookup periodically.
Can an RCTI be adjusted?
Yes. Where the value changes, the buyer issues a recipient created adjustment note, which follows the same rules and must be identified as issued by the recipient.
How long do RCTI records have to be kept?
Five years, the same as any other tax record — and that includes the written agreement, not just the invoices issued under it.
This article is general information and is not tax advice. The classes of supply for which RCTIs are permitted are set by ATO determination and can change. Confirm your particular arrangement with a registered tax or BAS agent, or with the ATO.
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