RCTIs for subbies: how recipient-created invoices work

An RCTI is a tax invoice the business receiving the work creates on the subbie’s behalf. It works only when both parties are GST-registered, agree in writing, and the supply fits an ATO-approved RCTI class.

For construction and labour hire businesses, that can save a fair bit of back-and-forth. You already hold the approved hours, rates, quantities or progress claim. Instead of waiting for the subbie to turn those details into an invoice, you create the tax invoice and send them a copy.

The important bit is that an RCTI is not just a remittance advice with a different heading. GST rules still apply.

What is a recipient-created tax invoice?

Normally, a subbie supplies labour or construction work and issues you a tax invoice. Under an RCTI arrangement, the roles swap for invoicing purposes. You calculate the value of the supply and issue the tax invoice to the subbie.

The subbie still makes the supply. They still declare any GST on their business activity statement. You may claim a GST credit if the normal creditable acquisition rules are met.

An RCTI does not change the agreed price, payment terms or responsibility for tax. It only changes who prepares the invoice.

You can find more payroll and contractor guidance in our labour hire hub.

When can you issue an RCTI?

You cannot decide to use RCTIs just because your accounts team prefers them. The arrangement must meet the ATO rules.

Generally:

1. The recipient and supplier must both be registered for GST.
2. The type of supply must fall within an RCTI class allowed by an ATO legislative determination.
3. Both parties must have a written agreement.
4. The supplier must agree not to issue its own tax invoice for the same supply.
5. Each party must notify the other if it stops being registered for GST.
6. The recipient must continue to meet its tax obligations.

Some construction and labour arrangements can fit an ATO determination, particularly where the recipient establishes the value using verified hours, quantities or progress. That is not blanket approval for every subcontractor arrangement.

A broad RCTI class may also be available to a recipient with at least $20 million in annual GST turnover, as at September 2026, provided all other conditions are met. Smaller businesses need to confirm that a specific determination covers the supply.

If you are unsure, check the current ATO legislative instruments or get tax advice before turning the arrangement on.

The figures that matter

The GST rate is 10%, as at September 2026. If the GST-exclusive value of approved work is $8,000, the RCTI would generally show $800 GST and a total of $8,800.

The compulsory GST registration threshold for most businesses is $75,000 in GST turnover, as at September 2026. A business below that threshold can register voluntarily. If the subbie is not registered, you cannot issue a GST tax invoice or add GST.

The recipient must generally provide the supplier with a copy of the RCTI within 28 days of making or determining the value of the taxable supply, as at September 2026.

If the subbie does not quote an ABN and no exception applies, withholding can apply at 47%, as at September 2026. An RCTI does not fix a missing ABN.

RCTI compared with a normal supplier invoice

Point	Supplier-issued tax invoice	Recipient-created tax invoice
Who prepares it?	The subbie supplying the work	The builder, head contractor or labour recipient
Who determines the value?	Usually the supplier, based on agreed work	Usually the recipient, using approved hours, quantities or progress
Is a written RCTI agreement needed?	No	Yes
Can both parties invoice the same supply?	No	No, the supplier agrees not to issue a duplicate invoice
Who reports the GST on sales?	The supplier	The supplier, even though the recipient created the invoice
Who may claim the GST credit?	The recipient	The recipient, subject to the normal GST rules

What needs to appear on the RCTI?

The document should clearly state that it is a “recipient created tax invoice”. It should also include:

• the supplier’s identity and ABN
• the recipient’s identity and ABN
• the issue date
• a clear description of the work
• relevant quantities, hours or progress amounts
• the GST-exclusive value, GST amount and total price
• enough detail to show which parts are taxable
• a useful invoice or reference number for your records

Tax invoices for sales of $1,000 or more have additional recipient identity requirements, as at September 2026. An RCTI will normally identify both parties anyway, but your template should still be checked against the current tax invoice rules.

Keep the written agreement, approved timesheets, rate schedules, variations and evidence supporting the calculation. GST records generally need to be kept for five years, as at September 2026.

A practical RCTI process

Start with a proper subcontract or labour supply agreement. Add the required RCTI terms rather than relying on an informal email.

Next, confirm the subbie’s legal name, ABN and GST registration. Do this during onboarding and check again if their details change.

At the end of the pay or claim period, approve the source records. These could be site timesheets, digital dockets, measured quantities or a certified progress claim. Apply the agreed rates and any valid variations.

Create the RCTI from those approved records. Review GST before releasing it. Send the subbie a copy and keep evidence of when it was sent.

Then pay against that RCTI. Do not accept a second tax invoice for the same work. If the value later changes, deal with it through the appropriate adjustment process rather than silently editing the original document.

For a closer look at gaps in contractor records, run the process through the compliance audit tool.

Watch the worker classification trap

Here is the part people sometimes miss: an RCTI does not prove that a worker is an independent contractor.

A worker can have an ABN, sign a subcontract and receive RCTIs, yet still be treated as an employee under workplace or tax law. Contractors paid mainly for their labour can also attract superannuation obligations in some circumstances.

The super guarantee rate is 12%, as at September 2026. Whether it applies depends on the real working arrangement, not the invoice heading.

Check who controls the work, whether the worker can delegate, who supplies tools, how commercial risk is handled and whether payment is for a result or mainly for personal labour. Payroll tax, workers compensation and labour hire licensing may each use their own tests.

RCTI data can also help with Taxable Payments Annual Report reporting. For covered building and construction payments, the usual TPAR due date is 28 August after the end of the financial year, as at September 2026. Keep supplier names, ABNs, gross payments and GST amounts clean from the start.

The simple rule is this: use RCTIs when the ATO conditions are met and your business genuinely determines the value. Do not use them to patch over weak onboarding, disputed hours or unclear contractor status.