Adjustment notes and credit notes in Australia
What the ATO calls an adjustment note, when you need one and what to put on it.
Under the GST law a credit note is called an adjustment note. You issue one when a sale changes after you issued a tax invoice, for example when goods are returned, the price is reduced or the sale is cancelled, so that the GST amount changes. An adjustment note must show the words adjustment note, your identity and ABN, the buyer, the reason, and the amount by which the GST changes, or a statement of the amount. You should issue it within 28 days after you become aware of the adjustment or after the buyer asks for it. The change is then reported on your BAS and the buyer adjusts their own credit. 4invoices has no separate credit note document. To record a reduction you can create a new invoice with negative amounts, and the PDF lets you send it. Check the wording with your tax agent.
- The GST word for a credit note is adjustment note.
- Issue one when a sale changes and the GST amount changes.
- Issue within 28 days of becoming aware or being asked.
- The BAS reports the change in the period of the adjustment.
How it works
Identify the original tax invoice and what has changed, such as a return or a price cut.
Work out the change in the amount and in the GST. For a $110 sale with $10 of GST that is fully cancelled, the adjustment is $110 including $10 GST.
Prepare the adjustment note with the words adjustment note, your ABN, the date, the buyer, the reason and the GST change. Refer to the original invoice number.
Send it to the buyer within 28 days. Report the adjustment on your BAS for the period it is made.
Legal references
- A New Tax System (Goods and Services Tax) Act 1999, section 29-75 - content of an adjustment note.
- Australian Taxation Office - adjustment notes and GST adjustments.
- GSTR 2013/2 - ATO ruling on adjustment notes.
Frequently asked questions
Is a credit note the same as an adjustment note?
Yes, for GST purposes. Many businesses still print credit note on the document, and it can work if it has the information the law requires.
When do I not need an adjustment note?
If the sale has no GST change, for example the sale was GST-free, the rule works differently. Ask your tax agent if you are unsure.
How long do I have to issue an adjustment note?
Within 28 days after you become aware of the adjustment or after the buyer asks for one, whichever is earlier.
Does 4invoices issue credit notes?
4invoices has no dedicated credit note type and does not send anything to the ATO. You can create an invoice with negative amounts for the reduction and download the PDF. You are responsible for the wording and the BAS.