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This Ruling explains a Determination that the Commissioner has made under subsection 29-70(3) of the A New Tax System (Goods and Services Tax) Act 1999 ('GST Act'). The Determination is about how recipient created tax invoices ('RCTIs') are issued when the consideration for a taxable supply is expressed in foreign currency and needs to be converted to Australian currency for GST purposes. A copy of the Determination is attached at Schedule 1.

The Ruling also: • explains a requirement that a recipient needs to satisfy when issuing RCTIs where the consideration for a supply is expressed in foreign currency; • explains how the Determination affects suppliers and recipients of taxable supplies for which RCTIs may be issued; and • explains an exception for holding an advice where the recipient's computer system is set up in a way that does not enable the recipient to use the supplier's conversion information.

This Ruling does not apply to taxable importations.

Goods and Services Tax Rulings GSTR 2000/10: recipient created tax invoices, and GSTR 2001/2: foreign exchange conversions, are extensively referred to in this Ruling. Certain terms defined or explained in those Rulings appear in bold when first mentioned in this Ruling.

All legislative references in this Ruling are to the GST Act, unless otherwise stated.

This Ruling applies [to tax periods commencing] both before and after its date of issue. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10)

The Commissioner released Goods and Services Tax Ruling GSTR 2000/10 on 10 May 2000. A copy of the Determination of three broad classes of RCTIs is attached at Schedule 1 to that Ruling. The Commissioner has subsequently determined a number of additional classes of RCTIs. [F1]

Goods and Services Tax Ruling GSTR 2001/2 was released on 2 February 2001. A copy of the Commissioner's foreign exchange conversion Determination is attached at Schedule 1 to that Ruling.

GSTR 2001/2 discusses how the Commissioner has determined that amounts of consideration expressed in foreign currency are to be converted into Australian currency so that the supplier may calculate the GST payable on the supply. The recipient is entitled to an input tax credit equal to the GST payable in Australian currency where the acquisition is a creditable acquisition (the credit is reduced where the acquisition is only partly creditable). [F2]

To prepare the RCTI, the recipient has to be provided with the information that the supplier would use to convert the foreign currency into Australian currency and to calculate the GST payable. Specifically, the recipient needs to know your particular exchange rate [F3] and the conversion day [F4] that are to be used.

The Commissioner has made a Determination under subsection 29-70(3) varying all previous RCTI Determinations. A copy of the Determination is attached at Schedule 1 of this Ruling. The Determination requires the recipient to hold information to be used for converting foreign currency to Australian currency.

The requirements for issuing RCTIs are varied by the Determination. The additional requirement to be satisfied by recipients is to be inserted into all previous RCTI Determinations at paragraph 4(c) [F5] or 5(c) [F6] as follows: '(ii) where the consideration for the supply is expressed in foreign currency, the recipient must hold a written advice stating: (A) your particular exchange rate; and (B) the conversion day, to be used for converting foreign currency to Australian currency before issuing the tax invoice, except where the computer system of the recipient is set up in a way that does not enable the recipient to use the conversion information of the supplier;'.

The recipient must issue the RCTI to the supplier within 28 days of the taxable supply being made, or within 28 days from determining the value of the supply.

If you are a supplier who makes taxable supplies for which the consideration is expressed in foreign currency, you need to give your recipient written advice stating: • your particular exchange rate; and • the conversion day.

You need to give the advice to the recipient after you make your first taxable supply after the date of the Determination where the consideration for the supply is expressed in foreign currency. You may provide the advice by means of a document, including one in an electronic form such as an e-mail or fax. [F7] It needs to be given within enough time to enable the recipient to issue the RCTI within 28 days of the taxable supply being made, or within 28 days from determining the value of the supply. [F8]

Smith makes taxable supplies to Jones. They have an RCTI agreement under which Jones issues RCTIs for the supplies. The contract for the supplies expresses the consideration in foreign currency.

Smith needs to give written advice to Jones after making the first taxable supply (after the date of the Determination). It needs to be given within enough time to enable Jones to issue the RCTI within 28 days of the supply being made.

If your particular exchange rate is an agreed rate [F9] and you have also agreed on the conversion day in writing, then you do not have to give a new written advice to the recipient. If the recipient holds the original or a copy of the agreement it will satisfy the requirement in the Determination to hold an advice. However, if there is an implied agreement about using an agreed rate you need to send a written advice to the recipient. Alternatively, you and the recipient may decide that the recipient can give you a written advice confirming the agreed rate and conversion day.

The original or a copy of the advice needs to be held by the recipient before the RCTI for the taxable supply is issued.

If the agreed rate and conversion day are contained in a written agreement (and a new written advice has not issued), the recipient needs to hold the original agreement, or a copy, before the RCTI for the taxable supply is issued.

In Example 1, if Smith and Jones had agreed in writing on a method of foreign currency conversion there would be no need to give a written advice. Jones needs to hold a copy of the written agreement which contains details of the agreed rate and conversion day before issuing RCTIs for the supplies.

If you (as the recipient) fail to satisfy the requirement to hold a written advice to be used for converting foreign currency when issuing a document intended as an RCTI, the document you issue will not (other than in the exception explained in paragraph 24) be an RCTI. This is because it will not be within a class of tax invoices determined as being RCTIs.

If this happens, even if you have made a creditable acquisition, you cannot attribute an input tax credit for the acquisition to a tax period until you hold a tax invoice issued by your supplier. [F10] To obtain the input tax credit, you can request a tax invoice for the taxable supply from your supplier who must give it to you within 28 days after your request. [F11]

An exception to the requirement to hold a written advice to be used for converting foreign currency is where a recipient's computer system is set up in a way that does not enable the recipient to use the supplier's conversion information. Instead, the system calculates the amount of GST shown on the RCTI using the recipient's own conversion information. In such a limited circumstance, a recipient can make a reasonable estimation of the GST payable (and input tax credit) in Australian currency and show the amount on the RCTI. The method the recipient uses to make the estimation needs to reflect a relevant exchange rate on a relevant conversion day. [F12] The supplier may use the amount of GST shown on the RCTI as a reasonable estimation of the GST payable for the supply, or the supplier may calculate the GST payable using its own conversion information. [F13]

In addition to the record keeping requirements for suppliers and recipients discussed in paragraph 42 of Goods and Services Tax Ruling GSTR 2000/10, the recipient is required to keep written advices and foreign currency conversion agreements for five years. [F14]

If you are the supplier, keeping originals or copies of the advices and agreements for five years is one way of retaining records of your transactions. These records will help to show that you have followed the Commissioner's foreign exchange conversion Determination and that you have used your particular exchange rate consistently.

Below is the detailed contents list for this Ruling: Paragraph What this Ruling is about 1 Date of effect 6 Background 7 Ruling with explanation 11 The requirement in the RCTI Determination 11 Written advice 14 Example 1 - written advice 16 Agreed rate 18 Example 2 - agreed rate in a written agreement 21 What happens if you do not meet the requirement? 22 Record keeping 25 Detailed contents list 27 Schedule 1 Page 8