GST Adjustments

Events will occur where adjustments need to be made to the amount of GST paid or input tax credit claimed in a previous tax period. An adjustment is not a correction in error. An adjustment arises as a result of changes to transactions or the entities operations that result in an over/under payment of GST or an over/under claiming of input tax credits.

There are 3 main circumstances that will give rise to adjustments:

  • Adjustment events
  • Bad debts or overdue debts
  • A change in the extent of creditable purpose (Div 129)

Adjustments also arise where a GST registration ceases (Div 138)

A change in the extent of creditable purpose (Div 129)
The number of adjustment periods you have for an acquisition depends on the GST exclusive amount paid for the acquisition.

GST registration ceases (Div 138)

  • You need to cancel GST registration if your business has closed down, been sold or changed structure.
  • You may also choose to cancel GST registration if your turnover falls below the compulsory registration threshold of $75,000.
  • To cancel registration you must notify the ATO by completing the Application to Cancel Registration Form.
  • A BAS Agent can also use their BAS Agent portal to notify the ATO of leaving the GST system. You need to notify the ATO within 21 days of the date you wish cancellation to take effect or penalties may be imposed.

Note in rare circumstances the ATO will not accept the application, or will allow the cancellation to take place at a different date to your request.

An entity will have an increasing adjustment if its GST registration is cancelled and immediately before the cancellation, the entity still had assets for which it has previously been entitled to claim input tax credits. Generally, the adjustment will be attributed to the entity’s concluding tax period.

If you believe that you will need to make a GST adjustment or would like any further information on GST adjustment requirements please do not hesitate to contact our office.

Kyla Dalton – Accountant