A payment lands from one of your larger customers and the document attached to it isn't a remittance advice, it's a tax invoice. Your business name is on it as the supplier, your ABN and the GST are on it, and you didn't write a word of it, so you're holding their numbering and their format against your sale. Whether your ledger already holds an invoice for the work decides everything that follows.
This describes Australian GST law and the ATO's rules for recipient-created tax invoices. In ATO language the recipient is the buyer who pays you and you're the supplier, which is why most guidance on this term reads as though it's addressed to somebody else. New Zealand's buyer-created tax invoice sits under Inland Revenue, and the UK runs a separate self-billing regime, covered in self-bills and payment certificates.
The short answer
Under a valid RCTI agreement their document is the tax invoice for that supply, so don't issue a second tax invoice for the same work. Decide per customer which document creates the debtor on your ledger, your own sales invoice or their RCTI, and never run both. Reconcile the bank credit against that receivable invoice, and tie the GST back to the total the RCTI itself states, because GST-free and taxable lines routinely share one page. Where their figure is lower than the invoice you hold, part-allocate the cash and leave the balance open.
Both routes are defensible. Either you raise your sales invoice as normal, keep it internal, and treat their RCTI as payment paperwork, or you raise nothing until their RCTI arrives and enter the sale from it. Either way the debtor is an ordinary accounts receivable invoice, and neither ledger has a document type for an RCTI, so the decision lives in your process.
Choose by whether you knew the value before your customer did. Where you know what the supply is worth as you deliver it, let your own invoice create the debtor, so revenue lands in the period you earned it. Where the value is only determined after delivery, let their RCTI create it, because invoicing an estimate means you'll be correcting most of them later. Write the choice down somewhere the person doing the bank reconciliation can see it.
The failure mode is running both at once, invoicing as usual and entering their RCTI as a second sale when it lands. One supply is now on the ledger twice, so income is overstated and, on a taxable supply, so is the GST on the BAS. Only one of them can be cleared by the cash, and the survivor sits on aged receivables until somebody writes it off.
What an RCTI is, and why more suppliers now receive one
A recipient-created tax invoice is issued by the buyer of a taxable supply rather than the supplier, where the Commissioner has determined it can be invoiced that way. The ATO sets it out on its recipient-created tax invoices page. Four conditions have to hold for one issued to you to be valid:
- Both parties are registered for GST, and each undertakes to tell the other if that stops being true.
- A written agreement records that the recipient will issue the tax invoice and that you won't. It can stand alone or sit in the RCTI itself.
- That agreement specifies the supplies it covers and is current on the day the document is issued, so work outside its scope isn't covered.
- The recipient is in a class the Commissioner has determined may issue RCTIs.
Sections 6 and 8 of the current determination carry the recipient classes and the agreement conditions. The class test used to be a narrow one, authorised trade by trade, and the Recipient Created Tax Invoice Determination 2023 (LI 2023/20, made under subsection 29-70(3) of the GST Act) repealed more than forty of those and replaced them with a test based on the entity. A government related entity or a large business entity may now issue an RCTI, and there's a separate route for smaller recipients that determine the value themselves, so whether you get self-invoiced depends more on who you sell to than on what you sell.
The practice stays entrenched where those determinations sat, in road transport, labour services, construction, agriculture, quarrying, recycling and government program payments. If you supply people rather than goods, see labour hire remittance reconciliation, or healthcare remittance reconciliation for the clinical equivalent.
How to record an RCTI in Xero or QuickBooks Online
Both routes key an ordinary sales invoice, and the only difference is where the numbers come from.
If their RCTI creates the debtor
Enter one AR invoice per RCTI, dated to the document, so the sale falls in the right period. Key each line as the RCTI characterises it, rather than as the customer record's default would. A GST-free line needs a GST-free rate, which is GST Free Income in Xero and the GST-free code in QuickBooks Online Australia. Check your keyed GST total against the GST total printed on their document before you save, because if they disagree then one of you has a line wrong, and finding that out on the day beats finding it after the BAS is lodged.
If your own invoice creates the debtor
Raise it as you would any other sale, then keep it out of the customer's hands, because emailing yours puts two tax invoices into circulation for one supply. Suppress the send, and check it won't go out in a bulk statement or reminder run either, which is how these usually escape. When their RCTI arrives, compare it against the invoice you hold, and where their figure is lower, allocate the cash that arrived and leave the balance open, using the part-allocation controls in matching one payment to multiple invoices.
Letting the RCTI create the sale carries a timing cost, because nothing is on your ledger until their document arrives and it arrives when their payment run says so. That's fine for cash and awkward for a period close, since work delivered in one month can land as revenue in the next. Either accrue at period end and reverse on arrival, or accept the lag and stay consistent about it.
Why the GST figure will not divide cleanly
GST-free and taxable supplies routinely sit on the same RCTI, so the GST won't be one eleventh of the total, and any check built on that assumption fails.
This is sharpest in care and health, where most supports are GST-free while items such as reports are taxable, and those payment runs are covered in the NDIS remittance processing guide. Your customer has made a GST decision on every line of a tax invoice carrying your name, so if they've got it wrong, your BAS is wrong.
So tie out against the document's stated total and never against one you reconstruct from a GST assumption. A document totalling $11,000 where $9,000 of supplies are GST-free and $2,000 are taxable carries $181.82 of GST, not $1,000.
When the price is only known after delivery
In agriculture, recycling and quarrying, the instrument exists because the value of the supply isn't knowable in advance. Weight, grade, moisture or contamination are assessed on arrival, and only the buyer holds that measurement.
A figure lower than you expected therefore isn't a short payment and shouldn't be chased or credited as one, because there was no prior number for the RCTI to fall short of, which is why the taxonomy of deductions taken on remittances doesn't apply here. What's worth checking, on a schedule instead of on every document, is the assessment sitting behind the value: the weighbridge docket or the grading sheet.
Your invoice number is not on the document
An RCTI carries their numbering, because they wrote it. Expect an RCTI number in their sequence, plus the agreement or order reference their payment run works from, and expect your own invoice number to be absent, because they never had to ask you for one.
So capture the reference that survives from one payment to the next. The RCTI number changes every time they pay you, while the agreement, contract or order reference is the same on every document that customer will ever send, so it's the one value that turns their paperwork into a search that lands on your ledger. Capture it at customer setup and put it on everything you raise.
Where that reference lives is the one point where the ledgers diverge. In Xero it belongs in the invoice's own Reference field, which the bank reconciliation search reads, so the agreement number printed on the RCTI returns your invoice. QuickBooks Online gives an invoice no header field of that kind, so the reference has to live in the message, which is the field RemitClear reads, and since an RCTI arrangement means you never send that invoice, the customer-facing message is seen only by you. Record their RCTI number as well, because that's what they'll quote if a payment is queried.
Two checks before you reconcile an RCTI payment
- Is the document valid as a tax invoice? It has to show that it's intended to be a recipient-created tax invoice, carry both ABNs, and where GST is payable, state that the GST is payable by the supplier, meaning you. If one of those is missing, ask for a corrected document before you post, because the correction gets harder once the period is closed.
- Are you still registered for GST? If you cease to be registered your customer must stop issuing RCTIs to you, and payers are expected to check registration status through ABN Lookup, so the inbound document flow can stop without warning. The recipient must also issue the original or a copy within 28 days of the sale, or of the date its value is determined.
What the software takes off you
Reading the document and finding the invoice is mechanical, and that's the layer RemitClear takes. It matches the lines on a payment document against your open receivable invoices in Xero or QuickBooks Online, and where your invoice number is absent it can still allocate on the agreement or order reference you recorded, then show you which one it matched on. Where the lines don't add up to the total the document prints, it says so before anything posts.
The judgement stays with you. You decide which document creates the debtor, raise the sales invoice on whichever route you chose, and check every GST characterisation on it, and RemitClear reads an RCTI the way it reads any other payment document.
