Adjustment notes when a sale changes: the GST paper trail

Use this process when you're the seller and a later agreement reduces or cancels a sale. If the original invoice or BAS was wrong from the outset, first check the BAS correction process. The ATO's error guidance explains why a later event is a different category.

Start with the commercial reason

Record what changed and when: goods returned, a service reduced by agreement or a sale cancelled. Keep the return authorisation, correspondence or revised agreement with the original invoice. A customer deciding to pay less isn't necessarily an agreed price reduction.

Check how much was originally paid and how much GST was reported. Cash-basis reporting can make an unpaid or partly paid sale different from the fully paid example below. Keep the commercial credit amount separate from the tax adjustment until the timing has been reviewed.

Follow one paid invoice through a reduction

Fictional example: a GST-registered seller made an ordinary wholly taxable sale for $2,200, including $200 GST, on 12 June. The customer paid in full and the GST was correctly reported. On 8 August the parties agree to reduce the price by $330 including $30 GST. The seller issues an adjustment note and refunds $330.

Document or event	Amount and reference	What it establishes
Original tax invoice	I-240: $2,000 plus $200 GST = $2,200	The original wholly taxable supply and customer
Agreement dated 8 August	Price reduced by $330 gross	Why and when the sale changed
Adjustment note dated 9 August	AN-19 references I-240; GST decreases $30; price decreases $330	The change to price and GST, with supplier/customer details
Revised sale value	$1,700 plus $170 GST = $1,870	Original amount less the agreed reduction
Bank refund dated 12 August	$330 linked to AN-19	Settlement of the credit, not another sale reduction

Schematic document fields, not a ready-to-issue legal form. Insert the actual required identities and details in a real adjustment note. Original ASBG worksheet; all example figures are fictional.

8 August: agreement

Retain the signed change or email trail.

9 August: adjustment note

Connect the note to the original invoice and identify the GST decrease.

12 August: refund

Match the payment to the credit already recorded.

BAS review

Confirm the adjustment period and documentation before reporting the $30 change.

The example assumes the original $200 GST was fully reported. A different payment history requires a fresh timing check. Original ASBG diagram with a complete text equivalent in each step; fictional examples.

Check what the note must contain

The ATO's GSTR 2013/2 sets out adjustment-note requirements. These include the issuer's identity and ABN, issue date, reason for the adjustment, change to GST and change to price, with enough information to show the document's purpose and effect. Recipient identification requirements apply in relevant cases, including the $1,000 supply-price threshold described in the ruling.

For a decreasing GST adjustment of more than $75, an adjustment note generally must be held before attribution, subject to exceptions. That threshold concerns the GST adjustment, not the gross refund. The ruling also explains the supplier's 28-day issue obligation, including the earlier request/awareness trigger where the tax-invoice conditions apply. Check the actual facts even for a smaller adjustment; retaining a clear note is useful regardless.

Keep the original invoice intact

Don't change I-240 to $1,870 and discard the original $2,200 document. That would obscure the amount initially invoiced, paid and reported. Record the credit or adjustment against the original transaction using your software's current workflow.

If the customer retains credit for a later purchase, there may be no bank refund. Keep that credit visible until it is allocated or repaid. Recording both a credit allocation and a refund for the same amount would over-settle it.

For mixed taxable and non-taxable invoices, calculate the adjustment from the affected lines. Dividing the entire refund by eleven can be wrong. The tax-invoice guide explains mixed-document presentation.

Continue with the next question

• Correct a GST mistake: later BAS or original revision?
• Security deposit or part payment? Check the GST treatment

Key takeaways

• Preserve the original invoice and evidence of the later change.
• Link the customer credit to its settlement without counting it twice.
• Review note requirements and the GST reporting period separately.

Where to get help

Use GSTR 2013/2 and a registered agent for adjustment timing and exceptions. Return to Bookkeeping and BAS for related records and reporting tasks.