Recipient Created Tax Invoice (RCTI): Rules, Format and Agreements

Recipient Created Tax Invoice (RCTI): Rules, Format and Agreements

A recipient created tax invoice (RCTI) is a tax invoice issued by the buyer instead of the seller. In Australia you can only issue one when both parties are registered for GST, you have a written agreement with the supplier, and the ATO has determined that the type of supply can be invoiced this way. Get any of those wrong and the document may not count as a tax invoice at all.

This guide covers the conditions, the agreement, what the invoice must show, and what happens when it goes wrong. It also looks at where a dealer management system (DMS) and AI fit in, because RCTIs are a data problem as much as a tax one. Equipment dealers meet them in consignment sales, trade-in and used equipment purchases from GST-registered sellers, and commission arrangements, so the workflow needs to be repeatable.

TL;DR

• An RCTI is issued by the recipient (the buyer), not the supplier. It must be clearly shown as a recipient created tax invoice and state that any GST payable is payable by the supplier.
• You can issue one only if both parties are GST-registered, you agree in writing, the agreement is current, and the ATO has determined the supply type is eligible.
• The invoice must show both ABNs and enough detail to meet the normal tax invoice requirements.
• A non-compliant RCTI is not treated as a tax invoice, which can delay your input tax credit until the supplier provides a valid one.
• A DMS with AI-assisted checks can help your team apply the same agreement and invoice rules every time. Treat it as a control, not a substitute for tax advice.

Table of Contents

• What a recipient created tax invoice is
• When you can issue an RCTI
• What the RCTI agreement must say
• What an RCTI must show
• What happens if an RCTI does not meet the rules
• A repeatable RCTI workflow for dealers
• Where AI fits into DMS and ERP invoicing
• Our perspective
• How MDMS supports finance and invoicing
• Common RCTI mistakes to avoid
• FAQ
• Sources

What a recipient created tax invoice is

In most transactions the supplier issues the tax invoice. The ATO explains that in special cases the purchaser may issue the tax invoice for its own purchases, and that document is an RCTI. The GST law reflects this: under section 29-70 of the GST Act, a tax invoice is issued by the supplier unless it is a recipient created tax invoice, in which case the recipient issues it. Either way, the document must clearly show it was intended to be a tax invoice, or an RCTI when the recipient issues it.

The practical difference is who holds the pen. With an ordinary tax invoice, your supplier sends you a bill and you pay it. With an RCTI, you work out what you owe, produce the invoice yourself, and pay against it. The supplier does not issue a competing invoice for the same supply.

Why it matters in a dealership

An RCTI shifts responsibility for the paperwork to you. If your team creates the document, your team owns the accuracy of the ABNs, the description, the GST treatment and the agreement behind it. That is manageable when it is built into a workflow. It is risky when it lives in a spreadsheet or a Word template that each person edits slightly differently.

When you can issue an RCTI

The ATO sets four conditions. You can issue an RCTI if:

1. you and the supplier are both registered for GST at the time the RCTI is issued;
2. you and the supplier agree in writing that you may issue an RCTI and the supplier will not issue a tax invoice;
3. the agreement is current and effective when you issue the RCTI; and
4. the Commissioner has determined that the type of goods or services sold under the agreement can be invoiced using an RCTI.

These are the conditions published on the ATO tax invoices page. The fourth is the one people miss. business.gov.au notes that the ATO only allows recipient created tax invoices in certain industries or business setups, so you should confirm that your supply type is covered by an ATO determination before you build any process around RCTIs. If you are unsure, check with your registered tax agent or the ATO.

Check each supplier, not just the category

Eligibility is checked per relationship. A supplier who is registered for GST today may later cancel registration. Your agreement should require each side to tell the other if that happens, and your process should check GST status on onboarding and when the agreement is renewed.

What the RCTI agreement must say

The agreement is the foundation. According to GSTR 2000/10, the written agreement (or an embedded agreement) must state that:

• the recipient can issue tax invoices for the specified supplies;
• the supplier will not issue tax invoices for those supplies; and
• both parties acknowledge that they are registered for GST and will notify the other if that registration ceases.

Separate document or embedded in the invoice

The ATO says the written agreement can be a separate document specifying the sales, or the terms can be embedded in the tax invoice. A separate agreement suits ongoing relationships such as regular consignment or commission arrangements. An embedded agreement can suit one-off or low-volume dealings, but it has a catch. Under GSTR 2000/10, the supplier must tell the recipient within 21 days of receiving the RCTI if it does not accept the proposed embedded agreement. If not all requirements are satisfied, the document will not be treated as a tax invoice for that class of RCTI.

Using the ATO form as a template reference

If you are searching for an RCTI agreement template, start with the ATO. Its Recipient-created tax invoices form (NAT 73657) can be used as a template or reference for the information to include. Industry bodies and law societies also publish agreement templates, and your legal adviser can tailor one to your supply arrangements. Whichever you use, check the final wording against the three points above.

What an RCTI must show

The ATO states that an RCTI must contain enough information to clearly determine the tax invoice requirements. It must also:

• show it is intended to be a recipient created tax invoice;
• show the supplier’s ABN and your ABN as purchaser; and
• state that any GST payable is payable by the supplier.

Those points come from the ATO guidance on tax invoices. A practical layout puts a clear “Recipient Created Tax Invoice” label at the top, then both parties’ names and ABNs, the date, a description of what was supplied, quantities and prices, the GST amount, and the total. Add the agreement reference if you have a separate agreement.

Mixed taxable and non-taxable items

Where an invoice mixes items, the ATO’s GST guidance says the document must clearly show which items are taxable, and notes that non-taxable items are those that are GST-free or input-taxed. Show the GST amount for the taxable items. For a particular supply with no GST charged, confirm the treatment with your tax adviser before you issue.

A quick layout checklist

Treat the table as a working checklist and confirm it against the ATO’s current page, since the requirements can change.

What happens if an RCTI does not meet the rules

The consequence is concrete. Under GSTR 2000/10, a document that fails to satisfy all the requirements is not treated as being within the class of invoices determined as RCTIs. In that case you cannot attribute an input tax credit for the supply to a tax period until you hold a tax invoice issued by the supplier, and the supplier must give you one within 28 days after you request it. The ruling sets this out in full.

So the cost of a faulty RCTI is delay and rework: a stalled credit in the BAS period, a request to the supplier, and a manual fix. The fix is a consistent process, which is where software earns its place. For a broader view of how GST errors affect dealers, see our guides on GST on repairs and GST on equipment rentals.

A repeatable RCTI workflow for dealers

Whether you use software or not, the same steps apply.

1. Confirm eligibility. Check that the supply type is covered by an ATO determination.
2. Verify GST registration. Record the supplier’s ABN and GST status, with the date you checked.
3. Sign the agreement. Store it where anyone creating an invoice can find it, with its start date and review date.
4. Create the invoice from source data. Pull quantities, prices and tax codes from the transaction, not from retyping.
5. Apply the required wording. The RCTI label and the GST statement should be automatic, not optional.
6. Send and track. Keep a copy and a record of when the supplier received it, because the 21-day window matters for embedded agreements.
7. Reconcile to your accounts. The invoice, the payment and the ledger entry should match.

On record keeping, we are not stating a specific retention rule here. Ask your tax agent what applies to your business, and keep the agreement, the invoices and the proof of GST registration checks together so any review can follow the trail.

Where AI fits into DMS and ERP invoicing

Most RCTI mistakes are not tax mistakes. They are data mistakes: a wrong ABN, a missing label, an agreement that expired last quarter, a supplier whose GST status changed. These are the kinds of repetitive checks that AI inside a DMS or ERP system is well suited to assist with.

Used sensibly, AI in this setting can help your team:

• flag a document that is missing a required element before it is sent;
• surface agreements that are approaching their review date;
• spot a mismatch between an invoice and the transaction it came from; and
• answer a staff question about a record without someone hunting through folders.

The rule is that AI assists and a person approves. The tax obligation stays with your business, so the output should be reviewed against the ATO requirements above, and your registered tax agent remains the authority for judgment calls.

An ERP-style platform adds a second advantage: one record. When sales, service, parts, rental and finance share data, an invoice does not need to be rebuilt in each department. Our view is that data should travel once. Our guide to GST compliant dealership software lists the checks to run in a demo, and our piece on accounts payable automation covers the supplier-payment side of the same workflow. If your invoices also travel electronically, read about Peppol e-invoicing in Australia.

Our perspective

Equipment dealers do not run one business, they run several: sales, workshop, parts, rental and finance, each with its own paperwork. An RCTI sits across all of them, because the agreement, the supplier record and the ledger entry must agree.

That is why we built MDMS as one platform designed for equipment dealerships, with modules you can adopt one at a time. Finance and invoicing sits alongside sales, service, parts and rental, with Australian GST compliance and Xero and MYOB integration, so your team is not copying figures between systems.

We also think AI belongs inside the workflow, not beside it. MDMS AI is designed to work on the same records your team already uses, so checks and answers come from your own data. You keep ownership of that data, with no lock-in.

Our advice is to settle the agreement and the invoice template first, then let the software enforce them consistently. Your tax agent decides what is eligible, and your system makes sure the decision is applied the same way every time.

ModernDMS

How MDMS supports finance and invoicing

MDMS is built for equipment dealerships, and its finance and invoicing features sit alongside CRM, quoting, inventory, workshop, rental, warehouse, warranty and procurement modules. You can start with the modules that solve your most immediate problem and add others later. Our setup is designed to take under an hour, and the Finance software for equipment dealers page shows how the finance department works day to day.

Published pricing, as listed on our pricing page:

Contracts are monthly and rolling, and there is a free trial. If you want to see how MDMS AI works with your invoicing records, start from the MDMS home page.

If your dealership also hires out machines, the same discipline applies to billing. Our guides on meter based billing and rental revenue recognition show how invoice data and GST treatment connect to the asset.

Common RCTI mistakes to avoid

• Assuming any supply qualifies. The ATO must have determined the supply type can be invoiced with an RCTI.
• Skipping the written agreement. Without a current agreement, the document is at risk of not counting as a tax invoice.
• Leaving out the GST statement. The invoice must say any GST payable is payable by the supplier.
• Missing an ABN. Both ABNs must appear.
• Letting the supplier issue their own invoice too. The agreement says they will not, so a duplicate creates confusion at BAS time.
• Forgetting that registration can change. Both parties promise to notify the other if GST registration ceases, so build a check around it.

FAQ

What does recipient created tax invoice mean?

It means the buyer, not the seller, issues the tax invoice for a supply. The ATO allows this in special cases, and the document must be clearly shown as a recipient created tax invoice. Any GST payable on it is payable by the supplier.

What must be on a recipient created tax invoice in Australia?

It needs enough information to meet the normal tax invoice requirements, a clear indication that it is an RCTI, both ABNs, and a statement that any GST payable is payable by the supplier. Taxable items must be identifiable where the invoice mixes taxable and non-taxable items.

Do I need a written agreement to issue an RCTI?

Yes. You and the supplier must agree in writing that you may issue RCTIs and that the supplier will not. The agreement can be a separate document or embedded in the invoice, and it must be current when you issue the RCTI.

Is there an RCTI agreement template I can use?

The ATO’s NAT 73657 form can serve as a template or reference for the information to include. Have your legal or tax adviser tailor the wording to your arrangement and confirm that your supply type is eligible.

What happens if my RCTI does not meet the requirements?

It will not be treated as an RCTI within the determined class. You then cannot attribute the input tax credit to a tax period until you hold a tax invoice from your supplier, which the supplier must provide within 28 days of your request.

Sources

• Tax invoices | Australian Taxation Office
• GSTR 2000/10 | ATO Legal database
• Recipient-created tax invoices | Australian Taxation Office
• How to invoice | business.gov.au
• A New Tax System (Goods and Services Tax) Act 1999, section 29-70 | AustLII
• GST - Goods and Services Tax | Australian Taxation Office

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