Making decreasing adjustments
As a supplier, you have a decreasing adjustment if:
- you give a purchaser a rebate that reduces the price of the goods and services that you sold to them
- you paid or were liable to pay the GST on the sale in an earlier tax period
- as a result of the rebate, the GST amount you previously paid or were liable to pay on the sale is more than the GST amount payable on the sale after taking the rebate into account.
You also have a decreasing adjustment if you make a payment to a third party (the payee) relating to something you supplied to another entity and which the payee has subsequently purchased. A decreasing adjustment arises in these circumstances regardless of whether you paid or are liable to pay the GST on the sale in the current or in an earlier tax period.
In these situations you have a decreasing adjustment that decreases your net GST liability or increases your GST refund for the reporting period. The amount of the adjustment is the difference between the amount of GST you paid or are liable to pay on the sale and the GST amount payable on the sale after taking the rebate into account.
You normally include the adjustment in your activity statement for the tax period you become aware of the adjustment. Generally, you cannot claim the decreasing adjustment until you hold an adjustment note or a third party adjustment note.
Making increasing adjustments
As a purchaser, you have an increasing adjustment if:
- you purchase goods or services and then receive a rebate from the supplier that reduces the price of the goods or services you purchased
- you claimed a GST credit for the purchase in an earlier tax period
- as a result of the rebate, the GST credit you previously claimed for the purchase is more than the GST credit amount that you are entitled to claim after taking the rebate into account.
You also have an increasing adjustment if you receive a payment from a third party (the payer) relating to a thing that you have purchased from another entity. An increasing adjustment arises in these circumstances regardless of whether you claimed or are entitled to claim the GST credit on the purchase in the current or an earlier tax period.
In these situations you have an increasing adjustment that increases your net GST liability or reduces your GST refund for the reporting period. The amount of the adjustment is the difference between the amount of GST credit you previously claimed or are entitled to claim and the GST credit amount that you are entitled to claim after taking the rebate into account.
You normally include the adjustment in the tax period you become aware of the adjustment.
Making an adjustment on all rebates that reduce the price of goods and services sold
If you are a supplier, you need to make an adjustment if either:
- you provide a rebate during a later tax period than the tax period you paid or were liable to pay the GST on the sale
- you make a third party payment.
If you provide a rebate (other than a third party payment) during the same tax period that you are required to report the GST on the sale, you do not need to make an adjustment. In this situation, the lower amount of GST payable on the sale will be reported on your activity statement in the first instance. If you provide a rebate that is a third party payment during the same tax period in which you are required to report the GST on the sale, you need to make an adjustment.
If you are a purchaser, you need to make an adjustment if either:
- you receive a rebate during a later tax period than the tax period in which you claimed a GST credit on the purchase
- you receive a third party payment.
If you receive a rebate (other than a third party payment) during the same tax period in which you claim a GST credit on the purchase, you do not need to make an adjustment. The lower amount of GST credit on the purchase will be claimed on your activity statement in the first instance. If you receive a rebate that is a third party payment during the same tax period in which you claim the GST credit on the purchase, you need to make an adjustment.
When to issue an adjustment note or a third party adjustment note
Adjustment events happen if the amount of GST paid or refunded is found to be incorrect after a business has lodged its activity statement for a period. For example, a change to the original price of goods or services that occurs in a subsequent tax period is an adjustment event.
You have a third party payment adjustment in situations where you supply a thing for resale and make a monetary payment to a third party (the payee) in connection with the payee's acquisition of that thing. This adjustment occurs when you do not supply the thing directly to the payee but rather through a supply chain.
You must account for such events or situations by making an adjustment to your GST liabilities on your activity statement. An adjustment that decreases your GST liability or increases your GST refund is called a decreasing adjustment.
Suppliers must issue an adjustment note to the recipient of the supply and payers must issue a third party adjustment note to payees within 28 days. A claim for a decreasing adjustment cannot be made until an adjustment note or a third party adjustment note is held.
However, if the decreasing GST adjustment is below the $75 threshold, you do not need to issue or hold an adjustment note or a third party adjustment note for that payment.
You do not have to issue an adjustment note if you pay a rebate in the same tax period you report the GST; however, you may choose to do so.
You must issue a third party adjustment note if you pay a rebate to a third party (the payee) in the same tax period you supplied the thing to another entity and which the payee has subsequently purchased.
For more information, see:
- GSTR 2013/2 Goods and services tax: adjustment notes
- GSTR 2000/19 Goods and services tax: making adjustments under Division 19 for adjustment events