GST Adjustments

You may have to make changes on your current activity statement to increase or decrease the amount of GST you must pay for a reporting period. These changes are known as “adjustments”.

There are two types of adjustments:

Increasing adjustments, which increase how much GST you must pay for a reporting period
Decreasing adjustments, which decrease how much GST you must pay for a reporting period.

Making GST adjustments is different from correcting GST errors made on an earlier activity statement:

A GST adjustment relates to a reported sale of 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.

Example of a GST adjustments on a non-cash (accruals) basis:

Johnny K Entertainment intends to hold a concert in April. In February, they sell 2,000 tickets for $110 each including GST. They remit the $20,000 GST in their February monthly activity statement.

In March, they cancel the concert and refund all ticket holders $110 each. In their March activity statement, they include a decreasing adjustment of $20,000 (1/11th of the refunded amount).

When to make adjustments

You may have to make an adjustment if an “adjustment event” occurs, resulting in a change to the amount of GST you must pay or GST credit you can claim. An adjustment even may occur on a sale or purchase.

You will need to make an adjustment for a sale/purchase if all of the following apply:

During a reporting period, an adjustment event occurs for your sale/purchase
You accounted for the sale or purchase in the activity statement for a previous reporting period
As a result of the adjustment event, the GST amount you previously reported no longer reflects the correct GST amount.

When you become aware of the need for an adjustment you generally report it in the activity statement for your current reporting period.

If you account for GST on a cash basis and have to make a payment as a result of an adjustment event, you generally make the adjustment in the activity statement for the reporting period in which you make the payment.

If you only paid part of the required amount in a given reporting period, you only make an adjustment in that period’s activity statement for the amount period.

Information from the ATO website on how to make adjustments can be found here:
https://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/Reporting,-paying-and-activity-statements/Making-adjustments-on-your-activity-statements/?anchor=Howtomakeadjustments#Howtomakeadjustments

Correcting GST errors

If you make a mistake (that fits the definition of a GST error) when reporting GST on an activity statement, you can correct that error on a later activity statement if you meet certain conditions.

The benefit of correcting a GST error on a later activity statement is that you will not be liable for any penalties or general interest charge (GIC) for that error.

Generally, it is easier to correct a GST error on a later activity statement than to revise an earlier activity statement. Revising an earlier activity statement that contains an error can incur penalties or GIC.

More information from the ATO website is available here:
https://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/Reporting,-paying-and-activity-statements/Correcting-GST-errors/