Correcting GST errors
Correcting GST errors
This guide explains how to correct GST errors you made on an earlier activity statement. In particular, it explains when you can correct GST errors on a later activity statement, in accordance with Goods and Services Tax: Correcting GST Errors Determination 2013 which took effect from 10 May 2013.
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You will not be able to use this guide if the reporting period for the later activity statement started before 1 July 2012.
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Refer to Correcting GST mistakes before 10 May 2013 to access the historical guidelines that you would have followed if you corrected an activity statement before 10 May 2013.
Refer to Appendix C in Correcting GST mistakes before 10 May 2013 for a summary of the key differences between the rules for correcting a GST error set out in this guide and the previous rules for correcting a mistake.
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When we say:
- activity statement, we mean the GST term GST return
- sales, we mean the GST term supplies
- purchases, we mean the GST term acquisitions
- GST credits, we mean the GST term input tax credits
- reporting period, we mean the GST term tax period
- business, we mean the GST term enterprise.
If you made a GST error on an earlier activity statement, you can choose to correct that error on a later activity statement if you meet the conditions set out in this guide.
The benefits of correcting GST errors on a later activity statement are:
- you are not liable to any penalties or general interest charge (GIC) for any GST error you correct on a later activity statement provided you meet the conditions to correct a GST error on a later activity statement
- generally, it is easier to correct a GST error on a later activity statement rather than revising the earlier activity statement.
Alternatively, you can correct any GST error by revising the earlier activity statement that contains the error. You can revise an earlier activity statement online or obtain an activity statement revision form by phoning us on 13 28 66.
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Penalties or GIC may apply if you choose to revise the earlier activity statement that contains the GST error.
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This guide applies to an activity statement that you give us on or after 10 May 2013 in which you correct a GST error you made in an activity statement for an earlier reporting period.
However, you will not be able to use this guide if the reporting period for the later activity statement (that is, the activity statement in which you want to correct the GST error) started before 1 July 2012.
Example 1: Commencement date of the guide
Carlene's Cookies has a current GST turnover of less than $20 million. When preparing its quarterly activity statement ending 31 March 2013, Carlene's Cookies realises on 15 May 2013 (5 days after 10 May 2013), it made a GST error in working out its GST net amount for the December 2011 quarter.
As Carlene's Cookies is lodging its activity statement for the March 2013 quarter on or after 10 May 2013, Carlene's Cookies can rely on this guide to correct the December 2011 quarter error. It can correct the GST error even though the error was made on an activity statement for a reporting period that ended before 10 May 2013.
However, this guide would not apply if the later activity statement that Carlene's Cookies was preparing was for the June 2012 quarter. It cannot correct the GST error on that activity statement as it is for a reporting period that started before 1 July 2012.
A GST error is a mistake you made in working out your GST net amount on your activity statement that would, if it was the only mistake that you made, result in you reporting or paying too much GST (credit error) or reporting or paying too little GST (debit error).
The error must relate to an amount of GST, GST credit or GST adjustment. A GST error does not include an error that relates to an amount of fuel tax credit, wine equalisation tax, or luxury car tax.
The GST error is the amount of GST, GST credit or GST adjustment and not the gross or GST-inclusive price of the transaction.
Example 2: GST error only relates to the GST, GST credit or GST adjustment
In working out the GST net amount for the monthly reporting period ending 30 June 2013, Bronlynn inadvertently reported GST payable of $1,000 on a taxable sale, instead of $100. That is, the price of the taxable sale was $1,100 (GST-inclusive). The GST error is the overpaid GST (that is, $900), not the price of the taxable sales (that is, $1,100).
Example 3: GST error must be quantified
On 15 April 2013, Noodle Developments discovers it has not reported the GST on sales it made for the December 2012 quarterly activity statement lodged on 21 January 2013. However, it is unable to work out the amount and decides to engage an accounting firm to review its accounts.
On 18 July 2013, the accounting firm finalises the review for Noodle Developments and works out the amount of the unreported GST for the December 2012 quarter was $5,000. As the mistake has now been worked out, it is a GST error this guide might apply to.
The following are not GST errors:
There are two types of GST errors you can make - a credit error or debit error.
You make a credit error if you make a GST error in working out your net amount for a reporting period that would, if it was the only mistake in the reporting period, have resulted in you reporting or paying too much GST. Examples of credit errors include:
- reporting a GST sale twice
- overstating the GST on sales (for example, reporting the GST on sales as $10,800 rather than the correct amount of $10,000)
- under-claiming a GST credit for your purchases
- omitting or understating a decreasing GST adjustment or overstating an increasing GST adjustment.
You make a debit error if you make a GST error in working out your net amount for a reporting period that would, if it was the only mistake in the reporting period, have resulted in you reporting or paying too little GST. Examples of debit errors include:
- failing to include GST on a taxable sale
- understating the GST on sales (for example, reporting the GST on sales as $1,000 rather than the correct amount of $10,000)
- overstating GST credits (for example, claiming GST credits for a purchase twice)
- omitting or understating an increasing GST adjustment or overstating a decreasing GST adjustment.
You cannot correct a credit or debit error on a later activity statement if any of the following apply:
You also cannot correct a debit error on a later activity statement if the debit error was as a result of recklessness or intentional disregard of a GST law.
You can correct a credit error on a later activity statement if all of the following conditions apply for each credit error:
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Credit errors are not subject to value limits.
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Credit error time limit
If you made a credit error on an activity statement for a reporting period that starts on or after 1 July 2012, you can correct the GST error on a later activity statement which starts within the four year period of review of the assessed GST net amount for the earlier reporting period that contains the GST error.
The period of review starts on the day we give you a notice of assessment and ends four years from the day after the notice of assessment is given. An assessment of your GST net amount is generally made on the day you lodge your activity statement. The activity statement is taken to be the notice of assessment given on the same day.
Example 4: Four year period of review
ABC Ltd, a monthly lodger, made a GST error in the September 2013 reporting period that resulted in an overstatement of its assessed net amount for that reporting period. As that activity statement was lodged and the net amount assessed on 1 October 2013, ABC Ltd can correct that GST error on an activity statement for a reporting period that starts between 1 October 2013 and 2 October 2017.
If you made a credit error on an activity statement for a reporting period that started before 1 July 2012, you can correct the GST error on a later activity statement if either of the following occurs:
- the GST net amount for the reporting period in which the error was made did not cease to be payable
- you have an entitlement to an outstanding GST refund for that reporting period that has not expired.
The GST net amount for the reporting period generally ceases to be payable four years after it became payable by you.
Your entitlement to a GST refund expires four years from the end of the reporting period to which the refund relates unless either of the following occurs:
- you notify us of the entitlement to the refund during the four year period
- we notify you of your entitlement to the refund during the four year period.
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For more information about the time limits for claiming GST refunds that applies to reporting periods starting before 1 July 2012, refer to Time limits on GST refunds.
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Example 5: Credit errors made in pre and post 1 July 2012 reporting periods
Sajeev Enterprises lodges quarterly activity statements and has a current GST turnover of $4 million. In March 2014, Sajeev Enterprises carries out a review of its past activity statements and discovers the following GST errors:
Summary of Sajeev Enterprises' GST errors
Sajeev Enterprises lodges its activity statement for the March 2014 reporting period on 28 April 2014. Sajeev Enterprises did not give the Commissioner a notification of its entitlement to the refund in relation to the credit error that was made in the December 2007 reporting period. Therefore, the time limit for correcting that GST error expired on 31 December 2011. As a result, the GST error cannot be corrected.
The $22,000 error in the September 2010 reporting period can be corrected in the March 2014 activity statement. This is because the GST error is being corrected in an activity statement that is being lodged within four years from the end of the September 2010 reporting period.
Sajeev Enterprises lodges its activity statements for the September 2012 and June 2013 reporting periods on 28 October 2012 and 28 July 2013 respectively. The September 2012 and June 2013 errors, totalling $20,000, can also be corrected in the March 2014 reporting period as those GST errors are being corrected in a reporting period that starts within the four year period of review for the September 2012 and June 2013 activity statements.
Correcting debit errors
You can correct a debit error on a later activity statement if all of the following conditions apply for each debit error:
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In working out whether a debit error can be corrected on an activity statement, each of the conditions must be satisfied. If any of the conditions are not satisfied, you cannot correct the debit error in a later activity statement.
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Debit error time limit
You can only correct a debit error on a later activity statement if it is within the debit error time limit that corresponds with your current GST turnover in the table below:
Table 1: Debit error time limit
Current GST turnover
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Debit error time limit
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Less than $20 million
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The debit error must be corrected on an activity statement that is lodged within 18 months of the due date of the activity statement in which the error was made.
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$20 million or more
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The debit error must be corrected on an activity statement that is lodged within 12 months of the due date of the activity statement in which the error was made.
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Your 'current GST turnover' is the value of all sales (excluding GST) that you make, or are likely to make in the current month, plus all the sales (excluding GST) that you have made in the previous 11 months.
There are sales that are excluded from the calculation of your current GST turnover. Some of the more common exclusions are:
- input taxed sales
- sales that are not for payment and are not taxable sales (for example, some sales to associates)
- sales not connected with a business that you carry on
- sales not connected with Australia.
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For more information on GST turnover, refer to Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover.
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Example 6: Debit error is within the debit error time limit
While preparing its July 2013 GST return, X Pty Ltd (a monthly lodger with current GST turnover below $20 million) discovers a debit error of $5,000 on its activity statement lodged for the June 2012 reporting period.
The debit error can only be corrected on an activity statement that is lodged within 18 months of the due date for lodging the activity statement for the reporting period in which the error was made. The due date for lodging the activity statement in which the debit error was made was 21 July 2012. Eighteen months from that date is 21 January 2014.
If X Pty Ltd lodges its July 2013 activity statement on 21 August 2013 and the debit error meets the other conditions, X Pty Ltd can correct the $5,000 error on that activity statement. This is because the lodgment date of 21 August 2013 is within 18 months from the due date of the activity statement for the June 2012 reporting period (that is, 21 July 2012).
The chart below summarises this scenario.
Chart 1: Debit error is within the debit error time limit
Example 7: Debit error is outside the debit error time limit
Jiesi has a current GST turnover of less than $20 million and lodges her activity statements quarterly. While preparing her activity statement for the September 2013 reporting period in December 2013, she discovers a debit error made on her activity statement for the March 2012 reporting period. The September 2013 activity statement is being lodged late as it should have been lodged by 28 October 2013.
The debit error can only be corrected on an activity statement that is lodged within 18 months of the due date for lodging the activity statement for the reporting period in which the error was made. The due date for lodging the activity statement in which the debit error was made was 28 April 2012. Eighteen months from that date is 28 October 2013.
Therefore Jiesi must correct the debit error on a later activity statement that is lodged on or before 28 October 2013.
Jiesi cannot correct the debit error on her September 2013 activity statement as she did not lodge that activity statement by 28 October 2013 (that is, within 18 months from the due date of the activity statement for the March 2012 reporting period).
The chart below summarises this scenario.
Chart 2: Debit error is outside the debit error time limit
Debit error value limit
You can correct a debit error but only to the extent that the net sum of the debit errors is within the debit error value limit that corresponds with your current GST turnover in the table below:
Table 2: Debit error value limit
Current GST turnover
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Debit error value limit
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Less than $20 million
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Less than $10,000
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$20 million to less than $100 million
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Less than $20,000
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$100 million to less than $500 million
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Less than $40,000
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$500 million to less than $1 billion
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Less than $80,000
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$1 billion and over
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Less than $450,000
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The net sum of the debit errors is the sum of one or more debit errors less the sum of any credit errors which you include on an activity statement to correct the relevant debit error. This allows you to offset credit errors against your debit errors for the purposes of working out whether you fall within the relevant debit error value limit.
The following statements explain how to work out the net sum of the debit errors:
- If you have a single debit error to correct on a later activity statement, you can correct that error to the extent that is within the relevant debit error value limit. You will need to revise the earlier activity statement in which the debit error was made for the amount which exceeds the debit error value limit.
- If you have multiple debit errors to correct on a later activity statement, the net sum of the debit errors is the sum of the debit errors. You can correct the net sum of the debit errors up to the relevant debit error value limit. You will need to revise the earlier activity statements in which the debit error or errors were made for the amount or amounts which exceed the debit error value limit.
- If you have multiple debit and credit errors to correct on a later activity statement, you offset the sum of the debit errors by the sum of the credit errors to work out the net sum of the debit errors. You can correct the net sum of the debit errors up to the relevant value limit. You will need to revise the earlier activity statements in which the debit error or errors were made for the amount or amounts exceeding the debit error value limit.
Example 8: Net sum of the debit errors exceeds the debit error value limit
Tim's Auto Pty Ltd has a current GST turnover of $5 million and lodges its activity statements quarterly. As part of its year-end review for the 2014 income year (conducted at the end of August 2014), it identifies two debit errors made in the previous year:
- a debit error of $7,000 that occurred in the September 2013 reporting period
- a second debit error of $5,000 that also occurred in the September 2013 reporting period.
The net sum of the debit errors ($7,000 + $5,000 = $12,000) exceeds the relevant debit error value limit of $10,000. Tim's Auto Pty Ltd can only correct the debit errors up to $10,000 in a later reporting period. Tim's Auto Pty Ltd decides to correct the first debit error of $7,000 and $3,000 (out of the $5,000) of the second debit error (assuming all other conditions for correcting a debit error are satisfied).
The balance of $2,000 from the second debit error must then be corrected in the earlier reporting period in which the error was made. That is, Tim's Auto Pty Ltd must revise its activity statement for the September 2013 reporting period to increase its assessed net amount by $2,000.
Alternatively, Tim's Auto Pty Ltd may choose not to correct one or both of the debit errors in a later activity statement and revise its activity statement for the September 2013 reporting period to increase its assessed net amount by the relevant amount.
Example 9: Net sum of the debit errors is within the debit error value limit
Mikaela's Tea House has a current GST turnover of $10 million and lodges quarterly activity statements. On 11 October 2015, while preparing the activity statement for the September 2015 quarter, Mikaela discovers the following GST errors:
Summary of Mikaela's Tea House's GST errors
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Clerical error, transcribing error
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Provided both the credit errors are corrected in the September 2015 quarter activity statement and the debit errors meet all the other conditions, Mikaela's Tea House then needs to work out whether each debit error as part of the net sum of the debit errors is within the debit error value limit of $10,000.
The net sum of the debit errors is $4,000 (that is, $19,000 - $15,000). As the net sum of the debit errors is below the relevant debit error value limit ($10,000), Mikaela's Tea House can correct both of the debit errors by taking them into account on the September 2015 activity statement (that is, the debit errors relating to the over claimed GST credits of $13,000 and the increasing GST adjustment of $6,000).
Example 10: Net sum of the debit errors is within the debit error value limit
While preparing its monthly activity statement for the August 2014 reporting period Ozco Ltd, which has a current GST turnover above $1 billion, discovers two GST errors made in working out its net amount for earlier reporting periods. One is a credit error for $1.5 million and the other a debit error for $1 million.
Assuming both GST errors meet the other conditions to include them on the August 2014 activity statement, Ozco Ltd needs to work out whether the net sum of the debit errors is within its debit error value limit of $450,000.
Ozco Ltd includes the credit error in its activity statement for the August 2014 reporting period. As the net sum of the debit errors is minus $500,000 ($1 million debit errors less $1.5 million credit errors), it is within the debit error value limit of $450,000 which applies to Ozco Ltd. Accordingly, Ozco Ltd can correct the debit error of $1 million on its activity statement for the August 2014 reporting period.
The debit error value limit applies to the entity that lodges the activity statement and is liable to pay the GST or entitled to the GST refund. For example, it applies to the representative member of the GST group (rather than each individual member) and the GST joint operator of a GST joint venture.
Example 11: GST groups
Danielle Pty Ltd, Joe Pty Ltd and JC Pty Ltd form part of a GST group and their current GST turnover is less than $20 million. Danielle Pty Ltd is the group representative and lodges the group's activity statement on a monthly basis. On October 2014, the tax agent for the group undertook the yearly reconciliation for the group's activity statements and income tax returns for the 2014 financial year. The tax agent noted that all the group members failed to charge GST on one of the products they sell resulting in a net sum of the debit errors of $12,000. The relevant debit error value limit is $10,000 and not $30,000 (that is, not $10,000 for each entity). Danielle Pty Ltd can correct debit errors up to $10,000 and will need to revise the activity statement(s) for the relevant reporting periods that contain the debit errors relating to the $2,000 excess amount over the debit error value limit.
How to make corrections on a later activity statement
To correct a GST error, complete the appropriate boxes on the GST section of your activity statement.
If you are using the accounts method, you add or subtract the correction amount (the total overstated/understated GST amount, GST credit or GST adjustment) at boxes 1A or 1B. You also reflect the correction at boxes G1, G2, G3, G10 or G11 as appropriate.
If you are using the calculation sheet method, you add or subtract the GST inclusive amount of the correction at the appropriate box on the calculation worksheet. If the correction relates to a GST adjustment, multiply the adjustment by 11 and include the amount in G7 (adjustments) if you have an increasing GST adjustment or G18 (adjustments) if you have a decreasing GST adjustment.
You cannot correct a credit or debit error on a later activity statement if any of the following occurs:
You cannot correct a debit error on a later activity statement if the debit error was as a result of recklessness or intentional disregard of the law.
If you are subject to compliance activity
A compliance activity is an examination of your GST affairs undertaken by us and includes reviews, audits, verification checks, record-keeping reviews/audits and similar activities.
Once you receive advice (by phone or in writing) from us about our intention to conduct a compliance activity, you cannot correct a GST error that is the subject matter of a compliance activity or errors arising in a reporting period that is subject to the compliance activity. If you find such GST errors, it is in your best interest to voluntarily disclose them. If you tell us about your GST error, it will be taken into account when we consider the application of a penalty.
Example 12: GST error cannot be corrected due to compliance activity
In June 2014, we notify Mike's Trading that we are conducting a review of his past property transactions. As a result, Mike undertakes his own review of his property transactions and discovers that he made a GST error treating a particular sale of property as taxable instead of input taxed. He also made GST errors claiming GST credits for purchases in relation to this sale. As these GST errors relate to a matter that is specified as being subject to compliance activity, Mike's Trading cannot correct these errors in a later activity statement.
Example 13: GST error can be corrected despite compliance activity
In March 2014, we notified Big Co that we are conducting a general review of Big Co's GST affairs for each of the monthly reporting periods ending 31 January 2013 to 28 February 2014. Big Co also conducts its own review and discovers a GST error made in working out its net amount for the December 2012 reporting period. As the GST error is made for an earlier reporting period that is not subject to compliance activity, Big Co can correct the error in a later activity statement, if the other conditions are satisfied.
A compliance activity is completed when you receive a notice of assessment or notice of amended assessment, or when we tell you that the examination has been finalised.
If you have corrected the GST error in another reporting period
You cannot correct a GST error more than once. For example, if you revise the earlier activity statement in which the GST error was made, or if you have already corrected the GST error in another reporting period, you cannot then correct the error on a later activity statement.
This includes if you partially correct a debit error because the relevant debit error value limit was exceeded. You cannot correct the amount that exceeded the debit error value limit on a subsequent activity statement.
Example 14: A debit error that was previously partially corrected
Greg's Garage has a current GST turnover of less than $20 million. When preparing its December 2014 quarterly activity statement, Greg's Garage discovered that it made a debit error of $12,500 on an earlier activity statement. Greg's Garage corrects the debit error up to the debit error value limit amount of $10,000 on its December 2014 quarterly activity statement. It cannot correct the excess amount of $2,500 on its activity statement for the quarter ending 31 March 2015. Greg's Garage must correct the debit error relating to the excess amount of $2,500 by revising the earlier activity statement.
Recklessness or intentional disregard of a GST law
You cannot correct a debit error if the error is a result of recklessness or intentional disregard of a GST law.
Recklessness is behaviour which falls significantly short of the standard of care expected of a reasonable person in the same circumstances. It is gross carelessness.
Intentional disregard of the law is something more than reckless disregard of, or indifference to, a tax law. The intention is a critical element. That is, a person must have understood the effect of the law and how it operates and made a deliberate choice to ignore the law.
Example 15: intentional disregard of a GST law
Duck and Dodge Co is facing a cash flow problem and deliberately under-reports the GST on its sales by $10,000 when lodging its activity statement for the November 2013 reporting period.
As the debit errors (the under-reporting of GST payable) result from Duck and Dodge Co intentionally disregarding the GST law, the errors cannot be corrected on a later activity statement.
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For more information about what is recklessness or intentional disregard of the law, refer to Miscellaneous Taxation Ruling MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard.
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The following are not GST errors:
Claiming a GST credit on a later activity statement
Claiming a GST credit on a later activity statement because you failed to claim it in an earlier activity statement is not a GST error. If you did not claim a GST credit for a purchase that you were entitled to claim on an earlier activity statement (for example, you were not aware that you had a tax invoice) you are entitled to claim it on a later activity statement.
A four year time limit generally applies to GST credit claims.
However, if you claim a GST credit in an earlier reporting period but incorrectly calculated or reported the amount, this will fall within the definition of a GST error. Assuming that it is the only mistake made in the reporting period, it results in you reporting or paying too much GST (credit error) or reporting or paying too little GST (debit error).
Example 16: Difference between a credit error and postponing a GST credit claim
Before lodging her activity statement for the September 2013 reporting period, Tess discovers that she only reported a GST credit of $10,000 instead of $15,000 for a creditable purchase she claimed on her August 2013 activity statement.
The $5,000 under claim of the GST credit is a GST error because it resulted in her assessed net amount for the August 2013 reporting period being overstated. Tess can correct this GST error by including the $5,000 on her activity statement for the September 2013 reporting period.
If Tess met all the conditions to claim the $15,000 GST credit in the August 2013 reporting period, but did not include the entire $15,000 until the September 2013 reporting period, she has not made a GST error in the August 2013 reporting period. Rather, Tess failed to claim the GST credit so she is entitled to claim it in a subsequent reporting period.
GST adjustments
You make a GST adjustment on your activity statement if a later event changes the amount of GST payable for a sale or the GST credit you are entitled to for a purchase. For example:
- an event occurs that changes the price of a sale or a purchase (for example, you provide a discount to a customer or receive a rebate from a seller)
- a taxable sale or creditable purchase you made is cancelled (for example, where goods are returned)
- you write off a bad debt or you recover a previously written-off bad debt
- your actual use of a purchase or importation for business purposes differs from your intended use
- you make or receive a third party payment
- you cancel your GST registration
- you sell something that you used to make financial supplies.
Making GST adjustments is different from correcting GST errors made on an earlier activity statement. A GST adjustment relates to a reported sale or purchase that was correct at the time of lodgment, whereas a GST error relates to an amount that was incorrect at the time of lodgment.
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GST errors can occur when making a GST adjustment. For example, omitting, understating or overstating a GST adjustment. This guide can be applied to correct such GST errors.
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GST restricted refunds
A GST restricted refund occurs where you make an overpayment of GST to us but you are not entitled to a refund.
For example, you may have treated a GST-free sale as a taxable sale and overpaid an amount of GST to us. Generally, you are not entitled to a refund of the overpaid GST unless you reimbursed your customer the overpaid GST and your customer was not GST registered or required to be GST registered. This is to prevent businesses from getting a windfall gain at the expense of their customers when they incorrectly charge GST on a sale.
If you are not entitled to a GST refund in such circumstances, the overpaid GST is not a GST error. This is because the GST restricted refund affects how you work out your GST net amount or assessed net amount for the reporting period.
Example 17: GST restricted refund on overpaid GST
Edgar incorrectly paid GST of $10,000 on sales on his activity statement for his August 2013 monthly reporting period. He subsequently realises that none of the sales should have been taxable and applies for a refund of the overpaid GST of $10,000. We restrict the refund of the overpaid GST. This means that there is no change to Edgar's assessed net amount for the August 2013 reporting period and no GST error arises.
However if we agree to refund the overpaid GST on sales, that is a GST error which you can correct on the later activity statement.
Example 18: Overpaid GST refunded
Abigail paid $3,000 in GST to us on 28 April 2013 for her March 2013 monthly reporting period. Abigail realises that some of the sales included on the March 2013 activity statement were actually GST-free sales and consequently she had overpaid GST. Her assessed net amount should have been $2,500.
Abigail reimbursed the overpaid GST to her customers, who were not registered for GST, as such, she is entitled to a refund of the overpaid GST of $500. Abigail can correct the GST error on a later activity statement that she lodges, providing she corrects the error within the relevant time limit.
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For more information about GST restricted refunds for overpaid GST, refer to Miscellaneous Taxation Ruling MT 2010/1 Miscellaneous tax: restrictions on GST refunds under section 105-65 of Schedule 1 to the Taxation Administration Act 1953.
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How to correct GST errors on a later activity statement - a step-by-step example
Theo Pty Ltd has a current GST turnover of less than $20 million. While preparing its activity statement for the June 2015 quarterly reporting period (being lodged on time), it discovers that it failed to claim a GST credit for a purchase it was entitled to claim for an earlier reporting period. Theo Pty Ltd was entitled to claim the GST credit in the September 2013 reporting period.
Theo Pty Ltd also discovers that it made two GST errors in working out its GST net amount for earlier reporting periods.
The first GST error is a $15,000 debit error made in working out the net amount for the March 2014 reporting period. The debit error relates to under-reporting GST payable on a taxable sale of commercial residential premises that, based on advice Theo Pty Ltd received at the time, was considered to be an input taxed sale of residential premises. Theo Pty Ltd lodged its March 2014 activity statement on 28 April 2014.
The second GST error is a $7,000 credit error relating to a decreasing GST adjustment. Theo Pty Ltd forgot to take into account the GST adjustment in working out its net amount for the June 2013 reporting period. Theo Pty Ltd lodged its June 2013 activity statement on 28 July 2013.
Theo Pty Ltd is not subject to any compliance activity at the time of preparing its activity statement for the June 2015 reporting period and has not taken the GST errors into account in working out its GST net amount for another reporting period.
As the GST credit that Theo Pty Ltd failed to claim in the September 2013 reporting period is not a GST error, it does not need to work out whether conditions for correcting a credit error are satisfied. Theo Pty Ltd can claim the GST credit in the June 2015 reporting period.
Theo Pty Ltd works out whether it can to correct the GST errors in its June 2015 quarterly reporting period as follows:
Table 3: Theo Pty Ltd's GST errors
Rules for correcting GST errors
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GST error made:
$7,000 credit error
June 2013 quarterly reporting period
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GST error made:
$15,000 debit error
March 2014 quarterly reporting period
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Does the error relate to an amount of GST, GST credit or GST adjustment?
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Yes
GST adjustment error
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Yes
Amount of GST
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At time of lodging the later activity statement to correct the GST error, do both of the following apply? The GST error:
- does not relate to a matter that is specified as being subject to compliance activity
- is not made in working out the net amount for an earlier reporting period that is subject to compliance activity
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Yes
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Yes
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The GST error was not taken into account in working out the net amount for another reporting period?
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Yes - not taken into account
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Yes - not taken into account
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Does the later reporting period start during the period of review for the assessment of the net amount for the earlier reporting period?
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Yes
June 2015 quarterly reporting period starts within period of review for June 2013 reporting period (28 July 2013 to 29 July 2017).
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Yes
June 2015 quarterly reporting period starts within period of review for March 2014 reporting period (28 April 2014 to 29 April 2018).
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If the GST error was a debit error, was the error caused by recklessness or intentional disregard?
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Not applicable - credit error
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No
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Are the debit errors corrected within applicable debit error time limit?
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Not applicable - credit error
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Yes
Lodgment date for June 2015 activity statement is within 18 months of the due date for lodgment of the March 2014 activity statement (that is, within 18 months of 28 April 2014).
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Is the net sum of the debit errors within the applicable debit error value limit?
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Not applicable - credit error
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Yes
Net sum of the debit errors is $8,000 ($15,000 less $7,000), which is below the applicable debit error value limit of $10,000.
Theo Pty Ltd cannot offset the GST credit it failed to claim as it is not a credit error.
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Theo Pty Ltd can correct both GST errors on its activity statement for the June 2015 quarterly reporting period. Theo Pty Ltd can also claim the GST credit that it failed to claim in the June 2015 quarterly reporting period.
In completing its activity statement for the June 2015 quarterly reporting period, Theo Pty Ltd uses the accounts method. Theo Pty Ltd adds $8,000 at box 1A. It then reflects the correction in 1A by including $165,000 (if it chose to report the GST-inclusive amount) in G1 or including $150,000 (if it chose to report the GST-exclusive amount). As the credit error of $7,000 relates to a decreasing GST adjustment, Theo Pty Ltd does not need to reflect the amounts in the other labels.
If Theo Pty Ltd uses the calculation sheet method, it must complete the calculation worksheet as per the instructions in Making adjustments on your activity statements. Theo Pty Ltd must include $165,000 (the GST-inclusive value for the sale of the commercial premises) in G1 on the calculation worksheet. It must then include $77,000 (decreasing GST adjustment multiplied by 11) in G18 on the calculation worksheet. It will then transfer the amounts from the calculation sheet to the activity statement.
If you correct a GST error on a later activity statement, keep a note to record the reporting period when the error was made and the activity statement it was corrected on. Records and other relevant information must also be kept to explain the correction.
More information
If you need more information, you can:
If you do not speak English well and need help from the ATO, phone the Translating and Interpreting Service on 13 14 50.
If you are deaf, or have a hearing or speech impairment, phone the ATO through the National Relay Service (NRS) on the numbers listed below:
- TTY users, phone 13 36 77 and ask for the ATO number you need
- Speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the ATO number you need
Last Modified: Friday, 10 May 2013
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