Anja Pich is a commercial lawyer and the Managing Lawyer at Lawpath. She practises across all areas of commercial law and advises businesses of every size, from first-time founders to established companies, on their legal, regulatory and commercial needs.
A recipient created tax invoice (RCTI) is a tax invoice issued by the buyer of goods or services instead of the seller. It flips the normal arrangement: usually the supplier invoices you, but in some industries it’s the customer who works out the value of the supply, so the Australian Taxation Office lets the recipient create the tax invoice instead. It’s legal, it’s common in areas like commissions, primary production and labour hire, and it comes with strict conditions.
An RCTI feels like an admin convenience, so people set one up, start issuing, and never check the fine print. Get a condition wrong and the document isn’t a valid tax invoice at all, which means the GST credit you claimed on it can be clawed back. That’s an expensive surprise at BAS time.
- The buyer issues it, not the seller. An RCTI is a tax invoice created by the recipient of the supply.
- Both parties must be registered for GST. That has to be true at the moment the RCTI is issued, not just when the deal was signed.
- You need a current written agreement first. It can be a standalone document or embedded in the RCTI itself.
- The supply has to be an ATO-approved type. The Commissioner’s 2023 determination sets out which supplies qualify.
- An invalid RCTI is not a tax invoice. Get it wrong and the GST credit claimed on it can be reversed.
What is a recipient created tax invoice?
A recipient created tax invoice is exactly what the name says: a tax invoice the recipient creates. Normally a supplier sends a tax invoice to the customer, the customer pays, and the customer uses that invoice to claim the GST credit. An RCTI reverses the paperwork. The customer generates the invoice, hands a copy to the supplier, and both parties rely on it for GST.
Why would anyone do it backwards? Because in some arrangements the buyer is the one who actually knows the number. Think of a processor who weighs and grades a farmer’s produce on arrival, or a platform that calculates a contractor’s commission from sales data. The supplier can’t invoice accurately until the recipient works out the value, so it’s cleaner to let the recipient invoice. It’s one of several types of invoices, and it’s the one with the most conditions attached.
Here’s how it plays out. Say a freight company uses owner-drivers and tracks every delivery in its own system. One driver completes 22 deliveries in a fortnight at $180 each. The company already has the numbers, so it issues the RCTI: $3,960 plus $396 GST, $4,356 in total, and sends the driver a copy. The driver never raises an invoice. (Figures are illustrative.)
The ATO only lets you flip the invoicing for supplies it has approved, between parties who’ve agreed in writing, who are both registered for GST. Miss any of those and the document stops being a tax invoice.
When can you issue an RCTI?
The ATO sets four conditions, and all four have to be met every time you issue a recipient created tax invoice. Check them every time you issue one.
| Condition | What it means in practice |
|---|---|
| Both parties GST-registered | You and the supplier must both be registered for GST at the moment the RCTI is issued |
| A current written agreement | You’ve agreed in writing that you’ll issue RCTIs and the supplier won’t issue tax invoices for those supplies |
| The agreement is effective | It has to be current and valid when the RCTI is issued, not expired and not created after the fact |
| An ATO-approved supply type | The goods or services must be a kind the Commissioner has determined can be RCTI-invoiced |
The first one quietly causes the most trouble. GST registrations lapse. A supplier cancels their registration, keeps supplying you, and if you keep issuing RCTIs, those invoices are no longer valid. Both parties have to be registered on the day each RCTI goes out, so checking supplier registration belongs in every issuing run.
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What must a recipient created tax invoice contain?
An RCTI has to carry everything a normal tax invoice does, plus a few extras that mark it out as recipient created. Leave one off and its validity is at risk.
- A clear statement that the document is “a recipient created tax invoice,” not a standard tax invoice.
- The ABNs of both the supplier and the recipient.
- The date, a description of what was supplied, the quantity and the price.
- The GST amount, or a statement that the total price includes GST.
- Where GST is payable, a statement that the GST is payable by the supplier.
Both ABNs is the one people forget, because a normal tax invoice for a smaller sale doesn’t always need the buyer’s ABN. An RCTI always does. You also have to give the supplier the original or a copy within 28 days of the sale or of the date you work out its value, and keep a copy yourself. If you’re setting up the document from scratch, our guide on how to create a tax invoice covers the base requirements an RCTI builds on.
The written agreement: separate or embedded
A compliant RCTI arrangement lives or dies on the written agreement, and that’s where the most recent ATO guidance adds useful detail. The agreement has to say two things: that you (the recipient) will issue RCTIs for the relevant supplies, and that the supplier won’t issue their own tax invoices for those same supplies. That second part matters, because two invoices for one supply is how businesses end up double-claiming GST by accident.
You can do it two ways. A separate agreement is a standalone document you both sign, covering the supplies it applies to. Or the agreement can be embedded in the RCTI itself, where the terms sit on the invoice and the supplier’s acceptance of the invoice counts as acceptance of the agreement.
The embedded route has a specific wrinkle worth knowing. Under the ATO’s current draft guidance, where the agreement is embedded in the RCTI, the supplier has 21 days after receiving it to tell you they don’t accept it. Say nothing for 21 days and the embedded agreement can operate. It’s a neat shortcut for high-volume arrangements, but it puts the onus on both sides to actually read what’s landing in their inbox.
Whichever route you take, the agreement can’t be backdated and can’t be expired. The ATO is explicit that an agreement created after the RCTI, or one that has lapsed, doesn’t meet the requirement. For a one-off or low-volume setup, a lot of businesses handle this inside a broader commercial contract rather than a separate form, and it’s worth getting the clause right from the start.
What’s changed: the 2023 determination and the new draft ruling
RCTIs used to be governed by dozens of narrow, industry-specific determinations. That changed with the Recipient Created Tax Invoice Determination 2023, which consolidated the rules and broadened the range of businesses that can use RCTIs, provided they meet the conditions. If your last read on RCTIs was from before 2023, more businesses qualify now than you might remember.
There’s a more recent development too. In 2026 the ATO released a draft GST ruling, GSTR 2026/D2, setting out the Commissioner’s view on RCTIs and replacing the old withdrawn ruling. It doesn’t change the 2023 determination, which remains the operative instrument. What it does is clarify the detail: when a recipient is taken to “determine the value” of a supply, the registration and written-agreement conditions, and points like the 21-day window on embedded agreements.
Two things to keep straight. It’s a draft, so treat it as the ATO’s proposed interpretation rather than settled law, and check the current status of GSTR 2026/D2 before relying on the finer points. And the practical requirements for a valid RCTI, the four conditions and the invoice content, haven’t moved. If your arrangements already meet those, the draft ruling is a good prompt to sanity-check your templates.
Where RCTIs trip businesses up
Four mistakes cause most RCTI problems, and each one can cost a GST credit. None of them are complicated. All of them are avoidable, and all of them can cost a GST credit.
No written agreement, or a handshake one. The most common issue is businesses issuing RCTIs off a verbal understanding. Without a current written agreement that meets the ATO’s requirements, the RCTI isn’t valid, however accurate the numbers are. A spoken “you invoice us, we’ll sort it” is not an agreement for GST purposes.
A common trap is a supplier who deregistered for GST, often because their turnover dropped, while nobody told the accounts team. Every RCTI issued after that point is invalid. Checking supplier registration on the ABN Lookup register before a run is cheap insurance.
Both parties invoicing the same supply. When the agreement doesn’t stop the supplier from issuing their own invoice, you can end up with two tax invoices for one supply and GST claimed twice. It’s an honest mistake that looks like fraud on an audit, so the “supplier won’t issue tax invoices” clause earns its place.
Missing the ABN or the RCTI wording. Templates built for ordinary invoices get reused for RCTIs without the recipient’s ABN or the “recipient created tax invoice” label. The document then fails the content test. A purpose-built template fixes this once instead of every month.
How to set up RCTIs properly
- Confirm the supply qualifies. Check that the goods or services are a type the ATO allows to be RCTI-invoiced under the 2023 determination.
- Check both GST registrations. Confirm you and the supplier are both registered, and build in a way to recheck before each issuing run. If you’re not registered yet, sort your ABN and GST registration first. An ABN is free from the government, or Lawpath can register it for $55.
- Put the agreement in writing. Either a separate signed agreement or terms embedded in the RCTI, naming the supplies and confirming the supplier won’t issue their own tax invoices.
- Use a compliant template. Make sure it carries both ABNs, the “recipient created tax invoice” label and the GST statements.
- Issue and keep records. Give the supplier a copy within 28 days, keep your own, and stop issuing the moment any condition stops being met.
RCTIs sit at the crossroads of a commercial contract and a GST rule, so if the arrangement is high-volume or the money is significant, it’s worth having the agreement and the process looked over. A short session with a business lawyer or your accountant can confirm the setup holds up before the ATO ever looks at it.
Frequently asked questions
What is a recipient created tax invoice?
It’s a tax invoice created by the buyer of a supply instead of the seller. The ATO allows it for approved supply types where the recipient works out the value, provided both parties are registered for GST and have a current written agreement that the recipient will issue the invoices and the supplier won’t.
Do both parties need to be registered for GST to issue an RCTI?
Yes. Both the recipient and the supplier must be registered for GST at the time the RCTI is issued. If either party’s registration lapses, any RCTI issued after that point is not a valid tax invoice, so supplier registration needs to be monitored, not just checked once at the start.
Do I need a written agreement for an RCTI?
Yes. A current written agreement is required before the RCTI is issued. It can be a separate document or embedded in the RCTI. Where it’s embedded, the supplier has 21 days after receiving it to object. The agreement can’t be backdated or expired when the invoice is issued.
How long must you keep a recipient created tax invoice?
You must keep RCTI records for at least five years, in line with the general ATO rule for GST and tax records. You also need to give the supplier the original or a copy within 28 days of the sale or of the date you determine the supply’s value.
What happens if an RCTI is invalid?
An RCTI that doesn’t meet the requirements is not a valid tax invoice. The recipient may lose the ability to claim the input tax credit, or have to reverse one already claimed, and both parties may need to correct their BAS. That’s why the conditions and the invoice content are worth getting right from the start.
Can RCTIs be used for GST-free supplies?
RCTIs are about taxable supplies where GST applies and the recipient determines the value. For GST-free or input-taxed supplies there’s no GST to account for in the same way, so an RCTI isn’t the relevant document. If you’re unsure how a particular supply is treated, check with your accountant before setting up an arrangement.
Getting your invoicing right
If recipient created tax invoices have felt like a grey area, you’re in good company. They’re genuinely useful once they’re set up properly. Most businesses that run into trouble skipped the written agreement, not the maths.
Start with a clear written agreement and a template that carries both ABNs and the RCTI label. If your arrangement is significant or ongoing, a quick chat with a business lawyer will make sure the agreement does its job.
