Made a Mistake Charging GST? Don’t Panic

Getting GST right matters for every small business, but mistakes can happen. If you discover that you’ve incorrectly charged GST, you can take steps to fix the issue and minimise the impact.

How GST Errors Commonly Occur

Businesses often overcharge GST when they:

• Treat a transaction that is not a sale as a taxable sale
• Treat a GST‑free or input‑taxed sale as taxable
• Miscalculate GST, resulting in too much GST reported on a business activity statement (BAS)

Understanding how the error occurred helps determine how you can correct it.

Did You Pass the GST on to the Customer?

Whether you passed the excess GST on to your customer is the key issue.

In most cases, if you charged GST and issued a tax invoice, the law treats the GST as having been passed on. When this happens, the excess GST becomes legally payable, and the tax office cannot refund it to you automatically.

Your Options If You Overcharged GST

If you passed the GST on to your customer, you generally have two options.

Reimburse Your Customer

If you refund the excess GST to your customer, you can claim the amount back by making a decreasing adjustment on your next BAS. If your customer is GST‑registered, they must make a corresponding increasing adjustment.

Apply for a Discretionary Refund

In limited circumstances, you can request a discretionary refund of excess GST without reimbursing the customer. The tax office only grants these refunds in specific cases where your business would not receive an unfair financial benefit.

When You Did Not Pass on the GST

If you can clearly demonstrate that you did not pass the excess GST on to your customer, you can treat the issue as a GST error.

You can fix the error by:

• Correcting it on a later BAS, or
• Revising the BAS for the period in which the error occurred

Correcting errors on a later BAS often provides the simplest solution, provided you meet the eligibility requirements.

Time Limits for Correcting GST Errors

Most small businesses with a GST turnover under $20 million can correct debit errors up to $12,500 on a later BAS if they do so within 18 months of the original BAS due date.

You cannot correct an error to claim additional GST credits if the four‑year time limit for claiming those credits has already expired.

Get Advice if You’re Unsure

GST rules can be complex, and the correct approach depends on your specific circumstances. If you feel uncertain about how to fix a GST mistake, seek advice from a qualified tax professional or contact the tax office for guidance.

Fixing GST Errors Early Matters

Identifying and correcting GST mistakes early helps protect your business from penalties, interest and compliance issues. Taking prompt action ensures your records remain accurate and your GST obligations stay on track.