What is an RCTI? RCTI requirements for Australian scrap metal buyers

What an RCTI is, and why scrap yards use them

Normally the seller issues the tax invoice. In scrap that’s awkward: nobody knows what a load is worth until it’s been sorted, graded and weighed at your yard. The ATO’s scrap metal code of compliance says exactly this — the seller often can’t give a tax invoice at delivery or pick-up because the value isn’t known yet — so the buyer can issue it instead. That buyer-made invoice is a recipient-created tax invoice, or RCTI.

An RCTI does the same job as an ordinary tax invoice. It’s the document that lets you, as a GST-registered buyer, claim the GST credit on what you paid, and it’s the seller’s record of a taxable sale they have to report. The difference is only who writes it — and because the buyer writes it, the rules about when you’re allowed to are stricter.

The rules come from two places: the GST Act, which lets the Commissioner decide which RCTIs count as tax invoices, and the instrument made under it — the Recipient Created Tax Invoice Determination 2023. If you’re reading older material that mentions RCTI 2009/1 or the 2017 determinations, those were repealed and replaced by the 2023 determination. Because both are federal, RCTIs work the same way in every state and territory — unlike the state scrap metal laws on seller ID and cash.

When a scrap buyer can issue an RCTI

The ATO lists four conditions. All four have to be true for each RCTI, not just the first one:

1. You and the seller are both registered for GST at the time the RCTI is issued.
2. You and the seller have agreed in writing that you may issue RCTIs and they won’t issue a tax invoice.
3. That agreement is current and in effect when you issue the RCTI.
4. The Commissioner has determined that the kind of supply can be invoiced with an RCTI — that’s what the 2023 determination does.

The determination works by class of buyer. Government-related entities and large businesses are covered for taxable supplies they receive. Any other business registered for GST is covered when it is the one that works out the value of the supply — which is how most scrap buying happens: you weigh it, you grade it, you apply your price.

The ATO also expects you to check. Its guidance is to confirm a supplier is registered for GST before the first RCTI, then check again from time to time if you keep buying from them. ABN Lookup shows whether an ABN is currently registered for GST.

The written agreement

Every RCTI arrangement needs a written agreement with the seller. The determination allows two kinds: a separate agreement signed up front, or an agreement built into the RCTI itself. The ATO’s scrap metal code says the agreement has to be in place before the RCTI is issued.

A separate (standalone) agreement must:

• say which supplies it covers — for example, all scrap metal you buy from that seller;
• be current when each RCTI is issued;
• include both parties acknowledging they are registered for GST when the agreement is made;
• say you can issue RCTIs for those supplies and the seller won’t issue tax invoices for them;
• say each party will tell the other if they stop being registered for GST.

An embedded agreement puts the same promises on the RCTI: it applies to the supplies on that invoice, you’ll issue the RCTIs and the seller won’t issue tax invoices, both are registered for GST and will say if that changes. It also has to tell the seller they have 21 days from receiving it to say they don’t accept, and that accepting the RCTI means accepting the agreement. If the seller does reject it within 21 days, the conditions for that RCTI aren’t met.

For a regular supplier, the standalone agreement is usually the simpler path: one signature, kept with their ABN and GST details, and every later purchase is covered. The ATO publishes a recipient-created tax invoice form you can use as a template.

What an RCTI must show

An RCTI needs everything an ordinary tax invoice needs, plus a few things of its own. Going by the ATO’s tax invoice rules, it must make it possible to clearly work out:

• that the document is intended to be a recipient-created tax invoice — not a standard tax invoice (title it “Recipient created tax invoice”);
• the seller’s identity and ABN;
• your ABN as the buyer — and, for sales of $1,000 or more, your identity or ABN as well;
• the date it was issued;
• a description of what was bought, with quantity and price — for scrap, the grade, the weight and the rate;
• the GST amount, and that the GST is payable by the seller;
• how much of each line is a taxable sale.

Two timing and keeping rules sit on top of that. You have to give the seller the original or a copy within 28 days of the purchase, or of the day you worked out its value if that came later. And you keep the original or a copy — the determination says for five years.

The ATO’s scrap metal code also lists what a dealer should record whenever a seller quotes an ABN: the ABN, name and address, amount paid, quantity by weight, a description of the material, the date, and — for deliveries — the seller’s proof of identity (ideally a driver licence number) and the registration and type of the vehicle. Most of that ends up on the RCTI anyway; the rest belongs on the purchase record behind it.

GST-registered sellers, ABN-only sellers and walk-ins

Across a normal day at the counter you’ll deal with three kinds of seller, and only one of them gets an RCTI.

• Registered for GST, with an agreement in place — a demolition contractor, an electrician, a plumbing business. These are the sellers RCTIs are for.
• Has an ABN but isn’t registered for GST — common with small operators. The ATO is explicit: an RCTI must not be issued to a supplier who quotes an ABN and isn’t registered for GST. Record their ABN and the purchase details instead.
• No ABN at all — the household clean-out, the bloke with a ute-load from the shed. They can’t give you a tax invoice and you can’t give them an RCTI. They get an ordinary receipt for the purchase.

Sellers with no ABN carry one more rule. Under the ATO’s code, for a purchase over $82.50 you either record a Statement by a supplier — their name and address, the amount, the weight and type of material, proof of identity, vehicle details for deliveries, their signature and the date — or withhold 47% of the payment under the no-ABN withholding rule and send it to the ATO. If it looks like business material (from commercial premises, in a commercial vehicle, commercial by its nature or volume, over $300 in one go, or a pattern of more than $3,000 a year), a general reason isn’t enough: the statement needs a specific reason, and you have to make reasonable enquiries to check it. Keep statements for five years.

Purchases of $82.50 or less don’t need withholding, but you still record what the material was, what you paid and the date.

Common RCTI mistakes, and how to avoid them

• Buying first, signing later. The agreement has to exist before the RCTI is issued. Get it signed when the supplier first comes on, not when the accountant asks.
• Trusting last year’s GST status. Suppliers deregister. If they’re no longer registered you can’t issue them RCTIs, and any GST credits you claimed on those invoices are wrong. The ATO’s advice if that’s happened is a voluntary disclosure.
• Treating an ABN as proof of GST registration. Plenty of ABNs aren’t registered for GST. Check ABN Lookup, not the number on the form.
• Two invoices for one load. If the supplier also sends their own tax invoice, the agreement that they won’t has broken down. Sort it out with them so there’s only one tax invoice for the load.
• Missing the 28 days. An RCTI sitting unsent in a drawer doesn’t meet the rules. Send it with the payment or the receipt.
• An invoice that doesn’t say what it is. A plain “Tax invoice” heading, a missing ABN, or no statement that the seller pays the GST all fall short of what an RCTI has to show.
• Giving a walk-in an RCTI. No GST registration, no RCTI — a receipt and the right ABN or statement-by-supplier record.

Most of these come down to keeping each supplier’s ABN, GST status and agreement together and looking at them at the moment you buy. That’s how AltScrap handles it: suppliers sign up online with their ABN, GST status and bank details, the RCTI agreement is done as part of that and stays attached to their record, and once you’ve approved them, buying from a GST-registered supplier makes the RCTI from the purchase itself — and sends it to MYOB or Xero as a bill. Walk-ins go through as ordinary purchases with a receipt.