There are certain circumstances when it makes sense for you to created an invoice on behalf of one of your suppliers - typically when there are numbers of contractors providing services to you.
When the recipient (you) of goods and services creates the tax invoice on behalf of the supplier, this type of tax invoice is known as a recipient created tax invoice (RCTI).
You can use an RCTI if and only all of the following conditions are satisfied:
- The recipient (you) and the supplier are both registered for GST
- A written agreement to create RCTI’s exists between both recipient and supplier specifying the supplies which will exist on the tax invoice
- The agreement is current at the time the RCTI is raised
- The goods or services are of the kind that are allowed to be sold via a RCTI (ring the ATO on 13 28 66 or search the ATO law database.
Like standard tax invoices, an RCTI must be a valid tax invoice to be accepted by the ATO when claiming input tax credits on the BAS.
The written RCTI agreement between the recipient and the supplier must contain:
- A list of goods and services to which the agreement relates
- A statement that the recipient can issue RCTI’s
- A statement that the supplier will not issue tax invoices for the goods and services
- A statement that both parties are registered for GST and if either the recipient or supplier cease being registered for GST then they will notify each other
- The agreement must be current whenever a RCTI is issued.
- We've created a sample RCTI agreement for you to use
- Once in place, you can create a valid tax invoice on behalf of your supplier - see sample RCTI templates in Word or Excel.
- Send a copy of the RCTI to your supplier.
- If we are providing a Launch, Go or Grow service, and we've provided you access to Receipt Bank you should send "yourself" the RCTI at the same time you're sending one to the supplier using you StartupCo.email@example.com invoice email address. From there on, we'll simply treat it the same as any other supplier invoice, reconciling it against the bank for you.
If you have larger numbers of contractors working for you regularly (imagine Uber drivers for example), it's likely you'll be using some form of booking system to take bookings from end-customer's. You'll then be wanting to use this information to determine how much to pay your contractors, and generate RCTIs for them. It's possible that you can use Xero's import bill function to bulk import a number of contractor bills into Xero. Of course, if you're talking serious volumes you should look at Xero's developer APIs for auto-creating these as part of your booking workflow.