• Correcting debit errors

    You can correct a debit error on a later activity statement if all of the following conditions apply for the debit error:

    Attention

    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.

    End of attention

    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

    Debit error time limit

    Less than $20 million

    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.

    $20 million or more

    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.

    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.

    Find out more

    • GST definitions – business
    • Information on GST turnover – Goods and Services Tax Ruling GSTR 2001/7External Link Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover
    End of find out more

    Example 5: 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.

    End of example

    Chart 1: Debit error is within the debit error time limit

     Chart 1: Debit error is within the debit error time limit

    Example 6: 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.

    End of example

    Chart 2: Debit error is outside the debit error time limit

     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

    Debit error value limit

    Less than $20 million

    Less than $10,000

    $20 million to less than $100 million

    Less than $20,000

    $100 million to less than $500 million

    Less than $40,000

    $500 million to less than $1 billion

    Less than $80,000

    $1 billion and over

    Less than $450,000

    The net sum of the debit errors is the sum of one or more debit errors less the sum of any credit errors that 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.

    Single debit error

    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 that exceeds the debit error value limit.

    Multiple debit errors

    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 that exceed the debit error value limit.

    Multiple debit and credit errors

    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 7: 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 8: 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

    Reporting period

    GST error

    Debit error

    Credit error

    December 2012

    Double counted taxable sales

     

    $10,000

    September 2014

    Over-claimed GST credits

    $13,000

     

    December 2014

    Clerical error, transcribing error

     

    $5,000

    March 2015

    Didn't claim increasing GST adjustment

    $6,000

     

     

    Total

    $19,000

    $15,000

    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 9: 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 that 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.

    End of example

    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 10: 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.

    End of example
      Last modified: 27 Aug 2015QC 16233