How does a GST-registered tradie issue a credit note?

A changed sale is not the same as a BAS error

The ruling says an adjustment event occurs when a supply is cancelled, the price changes, or a supply becomes or stops being taxable. A mistake in working out your GST net amount on the BAS is a different thing: the ATO calls it a GST error and has separate guidance for correcting it. An overlooked adjustment, or one worked out wrongly in an earlier period, can also be a GST error.

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The 28-day trigger and exceptions

The 28 days run from the earlier of the recipient's request or you becoming aware of the adjustment, where you issued or were asked to issue a tax invoice. If you neither issued nor were asked for a tax invoice, you only need to issue a note if the recipient asks. The ruling says this duty is subject to a threshold for decreasing adjustments in the GST Regulations.

A supplier or recipient generally must hold an adjustment note to attribute a decreasing adjustment. Exceptions include a decreasing adjustment that does not exceed $75 (or a further amount in the Regulations). There is no adjustment where the event happens in the same tax period as the GST is attributable. Bad debts are not handled with adjustment notes.

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What the note must contain

The ruling says there is no particular form, but the information must be in the document or clearly worked out from it.

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Blank template and hypothetical example

Hypothetical: a $7,700 invoice (GST $700) is reduced by agreement to $6,600 (GST $600). The price difference is -$1,100 including GST, and the GST adjustment is -$100. Reference the original invoice and keep it on file; do not delete it. If you find a mistake in the note, the ruling says you can cancel and reissue it.

ADJUSTMENT NOTE (credit)
[Business name] | ABN [ABN]
Adjustment note number: [CN-0000]   Issue date: [DD/MM/YYYY]
Issued to: [customer legal name] | ABN or other identity: [details]
Original tax invoice: [INV-0000] dated [DD/MM/YYYY], total $[amount]

Reason for adjustment: [brief reason, for example scope reduced by agreement on DD/MM/YYYY]
Price before adjustment (GST inclusive): $[amount]
Price after adjustment (GST inclusive): $[amount]
Difference in price: -$[amount]
Amount of adjustment to GST payable: -$[amount]

This note reduces the amount owing on the original invoice. The original invoice stays on record.

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Common questions

Is there GST on a credit note?

A credit note that works as an adjustment note shows the difference in price and the amount of the adjustment to the GST payable. If the GST is 1/11 of the price, a statement that the price difference includes GST can replace showing the GST amount.[1]

How to treat a credit note in GST?

A supplier or recipient generally must hold the adjustment note to attribute a decreasing adjustment on their GST return, subject to the exceptions in the ruling. Ask your tax agent how it flows to your BAS.[1]