GST adjustments¶

Most of the time, the GST you report on your Activity Statement is straightforward — you collected GST on a sale, or you are claiming a GST credit on a purchase, and that is that. But sometimes something changes after you have already reported it. When that happens, you may need to make a GST adjustment.

An adjustment is simply a way to correct the GST for a change that happened later. You do not go back and re-do the old statement — you make the change on a later Activity Statement.

In one line

A GST adjustment updates the GST you already reported when something changes later, and you make it on a later Activity Statement.

Why this matters¶

Business is not always tidy. Customers return goods, prices get renegotiated, orders get cancelled, and sometimes a customer never pays. When these things change the GST on a sale or a purchase, an adjustment keeps your GST correct — so you are not paying too much or too little.

What you will learn¶

What a GST adjustment is
The common situations that can trigger one
That adjustments are made on a later Activity Statement

Understanding the concept¶

A GST adjustment changes the amount of GST you previously reported, because something about the sale or purchase has changed since then.

The ATO describes several common situations that can lead to an adjustment:

A sale is cancelled — for example, an order falls through.
The price changes — you give a discount or the amount is renegotiated after the sale.
Goods are returned — the customer sends the goods back.
A debt is written off as bad — a customer does not pay and you write the amount off.
Something is used differently than planned — you bought something intending to use it one way for the business, but you end up using it differently. The ATO calls this a change in use.

When a change affects a sale, there is usually an extra step. The ATO explains that you generally need an adjustment note before you can reduce the GST on a sale. An adjustment note is a document that records the change — a bit like a matching note to the original tax invoice. (Bad debts are handled a little differently and do not need an adjustment note.)

The key idea is timing. You do not reopen the old Activity Statement. You make the adjustment on a later statement — generally the one covering the period in which you became aware of the change.

For accountants & bookkeepers

The ATO splits changes into increasing adjustments (which raise your net GST) and decreasing adjustments (which lower it), and you attribute an adjustment to the tax period in which you become aware of it. A decreasing adjustment for a sale generally needs a valid adjustment note first, except for smaller amounts and for bad debts, which are not subject to the adjustment note rules. Bad-debt and change-in-use adjustments each have their own conditions — check the ATO detail or ask an adviser before booking one.

Example¶

Jordan runs an online furniture store. Last quarter Jordan sold a dining table for $1,100 including GST, reported the GST on that sale, and lodged the Activity Statement.

This quarter the customer returns the table because it did not fit through the door. Jordan refunds the $1,100. Because the sale has effectively been reversed, the GST Jordan reported last quarter is now too high. Jordan raises an adjustment note for the return and makes a decreasing adjustment on this quarter's Activity Statement — Jordan does not go back and change the old one.

Separately, another customer bought $2,200 of goods on credit months ago and has now disappeared without paying. Jordan writes the amount off as a bad debt. That is also a change Jordan can adjust for on a later Activity Statement.

Common mistakes¶

Re-doing or revising the old Activity Statement instead of making the adjustment on a later one.
Reducing the GST on a sale without the adjustment note the ATO generally requires.
Forgetting that returns, discounts and cancelled orders all change the original GST.
Treating an unpaid invoice as a bad debt without checking the ATO's conditions first.

How this works in myaccountant¶

In the app — when you record a refund, a credit or a write-off against an earlier sale or purchase, myaccountant adjusts the GST for you and carries the change through to your Activity Statement, so the correction shows up in the right period.

Key points¶

A GST adjustment corrects GST you already reported when something changes later.
Common triggers include a cancelled sale, a price change, returned goods, a bad debt, or a change in how something is used.
You make the adjustment on a later Activity Statement, not the old one.
A change to a sale usually needs an adjustment note.
Bad debts are handled a little differently and do not need an adjustment note.
If you are unsure, check the ATO or ask an adviser before booking an adjustment.

Learn next¶

General information only — not tax, super or financial advice.

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