Edited version of private ruling

Authorisation Number: 1011550670291

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Ruling

Subject: GST and Tax Invoices

1. Are invoices to be issued by entity B on behalf of entity A via web portals tax invoices for the purposes of subsection 29-70(1) of the A New tax System (Goods and Services tax) Act 1999 (GST Act)?

Yes.

2. Does entity A satisfy its obligations to keep records pursuant to Subdivision 382-A in Schedule 1 to the Taxation Administration Act 1953 (TAA) by keeping the data contained on tax invoices issued for its taxable supplies in an electronic format (other than as a hard copy of the original tax invoice)?

Yes.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The entity is in Australia and registered for GST.

The entity carries on an enterprise of providing information technology services and related products.

The entity makes supplies of hardware and software and services and maintenance.

Other entities allow businesses to communicate through automated systems including the ability to electronically receive, respond and create business transactions.

Large entities often engage these other providers to streamline their business transactions.

Data entered into the other entities systems automatically updates the customer's accounting and accounts payable systems.

The systems are operated by independent third party entities.

Information is not electronically transmitted between entity A's internal systems and entity B.

Entity B system consists of a single application which services many different entities and are not tailored for a particular entity's needs.

Entity A's large customers have requested that it cease issuing paper-form tax invoices and commence to issue tax invoices via electronic portal.

Entity A intends to commence issuing portal tax invoices.

As entity B's operated by Independent third parties and not entity A, entity A is required to manually input the relevant invoice data into entity B's system.

The invoice data is used by many parts of entity A's internal accounting systems (including the date of the tax invoice, invoice number, amount payable and so on) for revenue recognition purposes.

Entity A intends to replicate the invoice data contained on the tax invoices generated by it's internal billing systems onto the portal tax invoices to be issued through entity B.

Entity A will not issue system tax invoices to customers who have requested portal tax invoices.

Entity A will only issue portal tax invoices that are replicas of the system tax invoices if an agreement is entered into with the respective customer.

Currently entity A has a complex set of internal accounting systems which are automated, controlled by entity A, certified and in-house.

The internal accounting systems include entity A's billing systems, which generate paper-form system tax invoices through automated processes. Little manual input is required by entity A personnel to generate system tax invoices.

The system tax invoices are automatically created by entity A's billing system pursuant to the following triggers:-

· For hardware and software orders - when notification of a shipment is received from entity A's manufacturing plant; and

· For Services and Maintenance orders - when billing data is received from entity A's upstream systems after the entity A's contractual obligations have been met or approved.

The billing systems are established such that tax invoices are only created following these "triggers" for accurate tax liability and revenue recognition purposes.

The creation date is the date contained on the system tax invoice.

Due to the batch nature of large automated computer systems specific invoice data is automatically assigned by the billing systems.

This does not occur until after an overnight batch printing run.

This results in delays between the creation date of the system tax invoice and the system tax invoice being printed of up to five calendar days.

The billing systems do not allow for tax invoices to be manually printed before the overnight batch printing.

Once the tax invoice has been generated, the billing systems automatically send the invoice data to:-

1. Entity A's receivable system for invoice payment collection purposes; and

2. Entity A's Accounting Ledger for revenue recognition purposes.

Entity A reports and remits GST in accordance with the date of the system tax invoice.

Once entity A has all the data from the data from the systems tax invoice it will need to manually input the data into Entity B's system to create and electronically transmit a portal tax invoice.

Due to the delay in generating the systems tax invoice the date of the portal tax invoice will always be a date earlier than the date the portal tax invoice is electronically transmitted.

Entity A has a complex set of internal accounting systems which form the overall framework for data integrity. Through these processes which are controlled by entity A, certified and in-house, entity A's internal accounting systems interact to ensure financial data used by each section of the system is accurate and consistent.

The date of the system tax invoice is assigned by the billing system and is a key piece of financial data used by different parts of the internal accounting system.

The external systems are operated by third parties and as such entity A cannot make changes to these systems.

The benefit to entity A's customers in using a portal tax invoice system is that it will be cost effective.

Entity A will perform reconciliations between the portal tax invoices and the system tax invoices and store the reconciliation reports in a secure document library. The invoice number on the portal tax invoice and the system tax invoice should be the same.

Entity A will maintain a copy of the system tax invoice in human readable format for more than five years and it will contain each element of a tax invoice.

Entity A will have agreements with entity As to retain copies of portal tax invoices in human readable format for up to eight years.

Entity A will have sufficient records to recreate the tax invoices in human readable format in the event that it is no longer able to obtain copies of portal tax invoices from a entity A.

Entity A will have access to those records through authorised persons.

Entity B

Will issue the tax invoices as a PDF file or image format.

Records will be maintained electronically for a period of eight years.

Access to the data may only be made by authorised persons.

Ensure that data that it submits or receives is accurate and complete.

Comply with all legal requirements relevant to the issue of invoices.

Agree that data protection and privacy laws will be complied with.

Reasons for decision

Issue 1

Question 1

Invoices to be issued by entity A through entity B's web portals are valid tax invoices for the purposes of subsection 29-70(1) of the GST Act.

Section 195 of the GST Act provides a definition of a tax invoice as a document that complies with the requirements of subsection 29-70(1) of the GST Act.

Subsection 29-70(1) of the GST Act states:

(1) A tax invoice for a *taxable supply:

a. must be issued by the supplier, unless it is a *recipient created tax invoice (in which case it must be issued by the recipient); and

b. must set out the *ABN of the entity that issues it; and

c. must set out the *price for the supply: and

d. must contain such other information as the regulations specify; and

e. must be in the *approved form.

However, the Commissioner may treat as a tax invoice a particular document that is not a tax invoice.

(* denotes a defined term under section 195-1 of the GST Act)

The invoices that entity A will issue through entity B meet the requirements of a valid tax invoice.

Further, for the purposes of section 29-70(1) of the GST Act, a supplier is taken to have issued an invoice when possession of the invoice is passed from the supplier to the customer. That is, the invoice is delivered to the customer.

With regard to electronic invoices, paragraph 24 of Goods and services tax Ruling GSTR 2000/17, Goods and services tax: tax invoices (GSTR 2000/17), provides that a tax invoice may be issued in an electronic form.

Paragraph 24 of GSTR 2000/17 states:

24. A tax invoice may be issued in electronic form, for example by Electronic data Interchange (EDI). Section 25 of the Acts Interpretation Act 1901 defines 'document' to include any article or material from which sounds, images or writings are capable of being reproduced with or without the aid of any other article or device. Therefore, a tax invoice in electronic form is a tax invoice.

In this case entity A is to issue the electronic tax invoice through a third party (entity B). You advise that entity A will input all the invoice data into the supplier network to create and electronically issue the tax invoices on behalf of entity B.

Entity A is authorised to issue the tax invoice on behalf of entity B. The tax invoice in this instance is considered to have been issued by entity B.

Goods and Services Tax Determination GSTD 2005/2 Goods and services tax: is an invoice that is posted on a website 'issued' for the purposes of Division 29 of the A New tax System (Goods and Services tax) Act 1999 (GSTD 2005/2), provides guidance in relation to tax invoices that are issued electronically.

GSTD 2005/2 at paragraph 11 provides that a supplier issues a tax invoice when the supplier 'sends' the invoice to the recipient. The date that the invoice issues is the date that the invoice is electronically transmitted, posted, couriered, hand delivered or is sent by similar method.

Further, Goods and Services Tax Ruling GSTR 2000/34 (GSTR 2000/34), at paragraph 33 provides that an invoice is issued when the supplier sends a document which notifies the recipient of the obligation to pay. GSTR 2000/34 provides that the issue date of the invoice may not be the preparation date of the invoice. In this instance entity B send the invoice when they have input all the relevant data to allow the invoice to be prepared which is then sent electronically to the customer and are valid tax invoices for the purposes of subsection 29-70(1) of the GST Act.

Question 2

The GST legislation does not prescribe the type of accounting system to be used in order to satisfy the GST record keeping requirements.

Different enterprises may have different needs in terms of type and level of complexity of the computerised accounting system they wish to operate. The Tax Office takes the view that choosing an accounting system and the levels of control required by an enterprise are a business decision that an entity makes. However, for an accounting system to be compliant with GST record keeping requirements, the system should be capable of meeting the record keeping requirements as provided under section 382-5 of the Tax Administration Act 1953 (TAA).

Generally, section 382-5(1) of the TAA provides that if you make a supply, importation, acquisition, dealing, manufacture or entitlement, to which section 382-5(1) applies you must: keep those records and explain all transactions and other acts that you engage in that are relevant to a supply and retain those records for at least five years after the completion of the transactions or acts to which they relate.

TR 2005/9 Taxation Ruling Income Tax: record keeping - electronic records, (TR 2005/9) sets out the Tax Office view on what are sufficient electronic records so as to record and explain all transactions for income tax purposes.

Paragraph 12 of TR 2005/9 discusses the storage of paper records in electronic form, and states:

A business using either a manual or a computerised accounting system may want to store and keep paper records in electronic form. When paper records are produced or received in the course of carrying on a business, the Tax Office accepts the imaging of those records onto an electronic storage medium provided that the electronic copies are a true and clear reproduction of the original paper records.

Paragraph 25 of TR 2005/9 states:

A taxpayer's computer system may generate records or alternatively, a taxpayer may scan paper records into an electronic form provided that the electronic copies are a true and clear reproduction of the original paper records.

Paragraph 37 provides the guidelines to be followed by any taxpayer in forming acceptable standards for electronic record keeping to comply with the record keeping requirements of the tax laws.

These include:-

· record retention

· data security and integrity

· system documentation

· retaining archival copies, and

· accessibility.

In your situation you have entered into an agreement with entity B to issue and store your tax invoices electronically. Through this agreement you are utilising the services of a third party entity to issue the tax invoices and retain electronic copies of those tax invoices on your behalf.

From the information provided, the retention of the records by entity B will be secure from unauthorised access, and any access to the system will be logged. Further you have taken steps and have provided a written agreement between yourself and entity B to ensure that the electronic storage will be archived for a period of eight years, you will have access to the records at all times during the retention period, entity B will ensure the storage and integrity of the records and that the records will remain complete and unaltered.

From the information provided the record keeping requirements are satisfied.

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