What is not a GST error
The following are not GST errors:
You cannot use this guide to make the adjustment or claim such credit or refund.
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 15: 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.
End of example
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, when 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.
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 these GST errors.
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GST restricted refunds
A GST restricted refund occurs when you make an overpayment of GST to us and you are not entitled to a refund because this would result in a windfall gain.
You can make an overpayment of GST when you incorrectly treat a GST-free or input taxed sale as taxable or when you miscalculate the GST payable (for example, miscalculating the GST for the sale of a property under the margin scheme) or for any other reason. This is also referred to as “excess GST”.
You are not entitled to a refund of excess GST if you have included it in the sale price and did not reimburse the incorrectly charged GST to your customers. This is to ensure that businesses do not get a windfall gain.
However if you would not receive a windfall gain despite not reimbursing the customers, you may be entitled to a refund. Go to Refund of excess GST – approved form.
You are entitled to a refund of excess GST if you have not passed on the GST by including it in the sale price. For example, you did not charge GST on the sale but incorrectly reported the sale as taxable on your activity statement. You can use this guide to correct the error if you meet all the other conditions.
If you have passed on the GST, you claim a refund of the excess GST when you reimburse the amount to your customers. In most cases, you claim a refund by making a decreasing adjustment in the reporting period that you make the reimbursement. Do not use this guide to make the correction.
Example 16: Excess GST reimbursed
Abigail paid $3000 in GST to us on 21 July 2014 for her June 2014 monthly reporting period. In August, Abigail discovered that some of the sales included on her June 2014 activity statement were actually GST-free sales and that she had consequently overpaid GST and incorrectly charged her customers. Her assessed GST net amount should have been $2,500.
In September 2014, Abigail reimbursed the excess GST to her customers and as a result, she became entitled to a refund of the excess GST of $500. To claim the refund, Abigail made a decreasing adjustment of $500 in her September 2014 activity statement.
End of example
Find out more
Goods and Services Tax Ruling GSTR 2015/1External Link Goods and Services Tax: the meaning of the terms ‘passed on’ and ‘reimburse’ for the purposes of Division 142 of A New Tax System (Goods and Services Tax) Act 1999.
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Rules for reporting periods commencing before 31 May 2014
The rules are different for what is a considered a GST restricted refund for reporting periods that commenced before 31 May 2014. Under these rules, a GST restricted refund only arises if a supply or arrangement that is not taxable is incorrectly treated as taxable. It does not apply to miscalculations of GST.
For these reporting periods, you are generally 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.
Example 17: GST restricted refund from a reporting period starting before 31 May 2014
Edgar incorrectly paid GST of $10,000 on sales on his activity statement for the 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 decline the refund for the overpaid GST because Edgar did not reimburse his customers. Edgar cannot use this guide to make a correction on a later activity statement.
If Edgar reimburses his customers (who were not registered for GST) in December 2013 and satisfies us that he has done so, Edgar can use this guide to correct the GST error in his December 2013 activity statement if he satisfies all other conditions.
End of example
Find out more
Miscellaneous Taxation Ruling MT 2010/1External Link Miscellaneous tax: restrictions on GST refunds under section 105-65 of Schedule 1 to the Taxation Administration Act 1953.
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