Adjustments for additional payments of GST where time limit for a credit has expired
You may be able to make an adjustment to reduce your net GST if both of the following apply:
- the sale of an item to you was treated as not being subject to GST – or only partly subject to GST
- after your entitlement to a GST credit for your purchase has expired, you make an additional payment (in accordance with a contractual obligation) to the seller relating to GST that was not previously thought to be payable on the sale.
For example, you may purchase an item for $10,000 under a contract that requires you to pay an additional $1,000 to the seller if the sale is later found to be subject to GST. If you provide the $1,000 after your entitlement to a GST credit for your purchase has expired, you will generally be able to make an adjustment to reduce your net GST for the relevant tax period by $1,000. Essentially, the outcome that you will obtain by making this adjustment (a reduction in your net GST of $1,000) will be the same as the outcome that would have arisen had you been able to claim the GST credit – which expired under the four-year time limit.