Credit error
You make a credit error if the calculated GST net amount results in you reporting or paying too much GST for the reporting period.
Examples of common causes of credit errors include:
- reporting a GST sale twice
- overstating the GST on sales due to incorrectly charging GST (for example, reporting a larger figure for GST on sales than the correct amount) and the refund of the overstated GST is not restricted
- omitting or understating a decreasing GST adjustment
- overstating an increasing GST adjustment.
You can correct a credit error on a later BAS if it is within the credit error time limit. Credit errors are not subject to value limits.
For more information, see LI 2023/32 A New Tax System (Goods and Services Tax) (Correcting GST Errors) Determination 2023.
Credit error time limit
You can correct a credit error on a later BAS that is lodged within the period of review for the period in which the error was made. The period of review starts on the day you lodge your BAS and ends 4 years and one day later.
If a credit error relates to GST credits, there is an additional time limit. You can't correct an error to claim additional GST credits where the 4-year credit time limit for claiming those GST credits has expired.
Example: 4-year period of review
ABC Ltd, a business that lodges a monthly BAS, made a GST error in the September 2022 reporting period that resulted in an overstatement of the net GST amount. The BAS was lodged and the net amount assessed on 3 October 2022.
ABC Ltd has until 4 October 2026 to lodge a BAS that includes a correction for that GST error.
End of exampleDebit error
A debit error occurs when the net GST amount you calculate results in you reporting or paying too little GST for the reporting period. Examples of common causes of debit errors include:
- failing to include GST on a taxable sale
- understating the GST on sales (for example, reporting a lesser amount for GST on sales, rather than the correct amount)
- overstating GST credits (for example, claiming GST credits for a purchase twice)
- omitting or understating an increasing GST adjustment
- overstating a decreasing GST adjustment.
You can correct a debit error on a later BAS if the following conditions apply for each debit error:
- the debit error is within the debit error time limit
- the net sum of the debit errors is within the debit error value limit
- the debit error is not as a result of recklessness or intentional disregard of a GST law.
Debit error time limit
The time limits which apply for the correction of a debit error are from the time the debit error occurred, not when it was discovered.
You can only correct a debit error on a later BAS if it is lodged within the debit error time limit that corresponds with your current GST turnover. If your turnover is:
- less than $20 million – the debit error must be corrected on a BAS that is lodged within 18 months of the due date of the BAS in which the error was made
- $20 million or more – the debit error must be corrected on a BAS that is lodged within 12 months of the due date of the BAS in which the error was made.
If the debit error time limit has expired, you need to revise the period that contains the error (if the period of review has not yet expired).
For more information on GST turnover, see GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover.
Example: debit error is within the debit error time limit
While preparing its October 2023 BAS, X Pty Ltd (a monthly lodger with current GST turnover below $20 million) discovers a debit error of $5,000 on its September 2022 BAS.
The debit error can only be corrected on a BAS that is lodged within 18 months of the due date for the BAS in which the error was made. The due date for lodging the BAS in which the debit error was made was 21 October 2022. Eighteen months from that date is 21 April 2024.
If the debit error meets all other conditions, X Pty Ltd can correct the $5,000 error on its October 2023 BAS, which it lodges on 21 November 2023, as this is within the 18 months period.
End of example
Example: debit error is outside the debit error time limit
Jiesi has a current GST turnover of less than $20 million and lodges her BAS quarterly. She lodges her BAS for the September 2023 quarter late, lodging it on 12 December 2023 instead of by28 October 2023. In preparing the September 2023 BAS she discovers a debit error made on her BAS for the March 2022 quarter.
The debit error can only be corrected on a BAS that is lodged within 18 months of the due date for the March 2022 BAS, which was 28 April 2022. Eighteen months from that date is 28 October 2023.
If Jiesi had lodged the September 2023 BAS by 28 October 2023 (the due date) she could have corrected the March 2022 debit error in the September 2023 BAS. However, as she lodged it late on 12 December 2023, she is outside the debit error time limit to correct the error from the March 2022 quarter the September 2023 BAS.
Jiesi needs to revise her March 2022 BAS to correct the error.
End of exampleDebit error value limit
You can correct a debit error if the net sum of the debit errors is within the debit error value limit that corresponds with your current GST turnover, as shown in the table below.
The net sum of the debit errors is the sum of any debit errors less the sum of any credit errors that are included on the same BAS.
|
Current GST turnover |
Debit error value limit |
|---|---|
|
Less than $20 million |
Less than $12,500 |
|
$20 million to less than $100 million |
Less than $25,000 |
|
$100 million to less than $500 million |
Less than $50,000 |
|
$500 million to less than $1 billion |
Less than $100,000 |
|
$1 billion and over |
Less than $560,000 |
If the net sum of the debit errors exceeds your debit error value limit, you can:
- correct the debit error or errors up to the value limit in your latest BAS
- revise the balance in the BAS for the period in which the error(s) was made. You can't correct the amount that exceeds the debit error value limit on a subsequent BAS.
Single debit error
If you have a single debit error to correct, you can correct that error on a later BAS (up to the relevant debit error value limit). You will need to revise the period in which the debit error was made for the amount that exceed the debit error value limit.
Example: a debit error that exceeds the debit error value limit
Greg's Garage has a current GST turnover of less than $20 million. When preparing its December 2023 quarterly BAS, Greg's Garage discovered that it made a debit error of $15,000 in working out their net amount on an earlier BAS.
Greg's Garage is within the debit error time limit and corrects the debit error up to the debit error value limit amount of $12,500 on its December 2023 quarterly BAS.
It can't correct the excess amount of $2,500 on its next BAS (the quarter ending 31 March 2024). Greg's Garage must correct the debit error relating to the excess amount of $2,500 by revising the earlier period.
End of exampleMultiple debit errors
If you have multiple debit errors to correct, you can correct the total amount of the debit errors on a later BAS up to the relevant debit error value limit. For any amounts that exceed the debit error value limit you need to revise the BAS for the earlier periods in which the debit errors were made.
Example: net sum of the debit errors exceeds the debit error value limit
Serge's Auto Pty Ltd has a current GST turnover of $5 million and lodges its BAS quarterly. As part of its year-end review for the 2024 income year (conducted at the end of August 2024), it identifies 2 debit errors, both made in the September 2023 reporting period, of $9,000 and $5,000.
The net sum of the debit errors ($9,000 + $5,000 = $14,000) exceeds the relevant debit error value limit of $12,500. Serge's Auto Pty Ltd can only correct the debit errors up to $12,500 in a later reporting period.
Serge's Auto Pty Ltd decides to correct the first debit error of $9,000 and $3,500 out of the $5,000 of the second debit error in its September 2024 BAS.
The balance of $1,500 from the second debit error must then be corrected in the BAS in which the error was made (September 2023) by increasing the assessed net amount by $1,500.
Alternatively, Serge's Auto Pty Ltd can choose to revise the September 2023 reporting period to increase its assessed net amount by the relevant amount.
End of exampleMultiple debit and credit errors
If you have multiple debit and credit errors to correct on a later BAS, 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. For any amounts exceeding the debit error value limit you will need to revise the BAS for the period in which the debit errors were made.
Example: 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 monthly BAS. On 11 November 2023, while preparing the BAS for the October 2023 period Mikaela discovers the following GST errors.
|
Reporting period |
GST error |
Debit error |
Credit error |
|---|---|---|---|
|
December 2020 |
Double counted taxable sales |
– |
$10,000 |
|
September 2022 |
Over-claimed GST credits |
$13,000 |
- |
|
December 2022 |
Clerical error, transcribing error |
– |
$5,000 |
|
March 2023 |
Didn't report increasing GST adjustment |
$6,000 |
– |
|
Total |
– |
$19,000 |
$15,000 |
Provided the debit errors meet all the other conditions, Mikaela needs to work out whether the net sum of the debit errors is within the debit error value limit of $12,500.
As she is correcting the 2 credit errors on the same BAS as the debit errors, she calculates that the net sum of the debit errors is $4,000 (that is, $19,000 – $15,000). This is below the relevant debit error value limit ($12,500), so Mikaela's Tea House can correct both of the debit errors (that is, the over-claimed GST credits of $13,000 and the increasing GST adjustment of $6,000) on the October 2023 BAS.
End of example
Example: net sum of the debit errors is not within the debit error value limit
While preparing its monthly BAS for the October 2023 reporting period Ozco Ltd discovers 2 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 $2.25 million. Ozco Ltd has a current GST turnover above $1 billion.
The net sum of the net debit errors is $750,000 ($2.25 million debit error less $1.5 million credit error). This exceeds the relevant debit error value limit of $560,000. Ozco Ltd can only correct the debit errors up to a net value of $560,000 in a later reporting period. The remaining $190,000 ($750,000 − $560,000) can't be corrected in a later period.
Ozco Ltd:
- corrects the credit errors and $2.06 million of the debit error on its October 2023 monthly BAS
- will need to revise the earlier period in which the debit error occurred for the excess amount of $190,000.
GST groups
The debit error value limit applies to the entity that lodges the BAS and is liable to pay the GST or is entitled to the GST refund. For example, it applies to the:
- representative member of the GST group (rather than each individual member)
- GST joint operator of a GST joint venture.
Example: GST groups
Danielle Pty Ltd, Joe Pty Ltd and JC Pty Ltd form part of a GST group that has a current GST turnover of less than $20 million. Danielle Pty Ltd is the group representative and lodges the group's BAS on a monthly basis.
On 31 October 2023, the tax agent for the group undertook the yearly reconciliation for the group's BAS and income tax returns for the 2023 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 $15,000.
The relevant debit error value limit for the group is $12,500 (not $12,500 for each entity). Danielle Pty Ltd can:
- correct debit errors up to $12,500 in a later BAS
- will need to revise the BAS that contain the debit errors relating to the $2,500 excess amount over the debit error value limit.
Recklessness or intentional disregard of a GST law
You can't correct a debit error if the error is a result of recklessness or intentional disregard of a GST law.
Recklessness is behaviour that 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.
For more information, see MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard.
Example: intentional disregard of a GST law
DD Co is facing a cash flow problem and deliberately under-reports the GST on its sales by $12,500 when lodging its BAS for the current reporting period.
As the debit errors (the under-reporting of GST payable) result from DD Co intentionally disregarding the GST law, the errors can't be corrected on a later BAS.
End of example