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.
Sections within Correcting debit errors
Last Modified: Friday, 10 May 2013