When a credit or debit error cannot be corrected on a later activity statement
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 a GST 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 11: 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 12: 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.
End of example
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.
For information about how the debit error value limit works, see debit error value limit.
Example 13: 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.
End of example
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 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.
Example 14: intentional disregard of a GST law
DD 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 DD Co intentionally disregarding the GST law, the errors cannot be corrected on a later activity statement.
End of example
Find out more
Miscellaneous Taxation Ruling MT 2008/1External Link Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard
End of find out more