Adjustment notes (credit notes) for GST in Australia

Sooner or later you'll need to change an invoice you've already sent. A client returns goods, you agree a discount, or you notice you overcharged. When you're registered for GST, the document that corrects a tax invoice is an adjustment note. It's what most people call a credit note, with a few GST details added.

This guide explains when you need an adjustment note, the 28-day rule, what the ATO's ruling GSTR 2013/2 says it must show, and how adjustments go on the BAS. The free invoice generator makes adjustment notes that refer back to the original invoice.

When you need one

An adjustment event is something that changes the GST on a sale after you've accounted for it. The common ones are:

• cancellation: the sale doesn't go ahead, in full or in part, such as goods returned;
• a change in price: a discount, rebate or correction of an overcharge;
• a change in status: something you treated as taxable turns out to be GST-free, or the other way round.

When one happens, you must issue an adjustment note within 28 days of the earlier of:

• your client asking for one; or
• you becoming aware of the adjustment.

That deadline applies if you issued a tax invoice for the sale, or your client asked for one. Otherwise, you only have to issue an adjustment note when asked.

When you don't

• The same tax period. If the change happens in the same tax period in which you reported the original GST, there's generally no adjustment to make: you report the corrected figures. Many businesses still send a credit note so both sets of records match.
• Small adjustments. A decreasing adjustment of $75 or less can be claimed without an adjustment note.
• Bad debts. A client who doesn't pay is not an adjustment event. Writing off a bad debt has separate GST rules, so don't issue an adjustment note for it.

What an adjustment note must show

GSTR 2013/2 sets out the details, and each must be clear from the note itself:

1. That it's an adjustment note, and the effect of the adjustment. Headings that qualify include "Adjustment Note", "GST Adjustment", "Tax Invoice Adjustment" and "Amended Tax Invoice".
2. Your identity and ABN.
3. Your client's identity or ABN, if the original tax invoice was $1,000 or more.
4. The date you issue it.
5. A brief explanation of the reason for the adjustment.
6. The GST adjustment. If the GST is one-eleventh of the price difference, a statement that the difference includes GST is enough.
7. The difference in price before and after the adjustment.

Quoting the original invoice's number isn't required, but it's the natural way to explain the reason and the price difference. Invoice Native always prints it.

Worked example: goods returned

A GST-registered supplier issued tax invoice INV-0042 for $2,200.00, including $200.00 GST. The client returns one item worth $550.00 including GST, in a later tax period:

The note shows the supplier's name and ABN, the client's name (the original was over $1,000) and the date. The supplier reduces its GST by $50.00 in the period of the adjustment, and the client uses the note to adjust the GST credit it claimed.

How Invoice Native makes them

Invoice Native's adjustment notes print:

• the title "Adjustment Note" (or "Credit Note" if you're not registered for GST);
• your name and ABN, and your client's name;
• the original invoice's number and date;
• a reason: "Goods returned", "Overcharge / pricing error", "Agreed discount", "Cancelled service" or "Other";
• the GST adjustment at each rate and the price difference, as the note's own totals.

Notes are numbered in their own sequence, starting at CN-0001.

On the BAS

Under Simpler BAS, you net adjustments into G1 and 1A in the period the adjustment happens. If you use the full calculation worksheet, increasing adjustments go at G7 and decreasing adjustments at G18. Signed-in businesses get a BAS GST summary in Invoice Native that subtracts adjustment notes from their sales and GST for the period.

Checklist

• ✅ Title "Adjustment Note" or similar
• ✅ Your name and ABN, the date, and your client's identity for invoices of $1,000 or more
• ✅ The reason, and the original invoice's number
• ✅ The price difference and the GST adjustment
• ✅ Issued within 28 days of a request or of you becoming aware
• ✅ No adjustment note for bad debts

Rules can change, so check the ATO's guidance or ask a registered tax agent about your situation. Invoice Native does not provide tax advice.