Private ruling: Goods and services tax (GST) and adjustment notes
Date of advice: 20 November 2015
Published: February 2016

Ruling: Q1: Are the adjustment notes you issue valid adjustment notes for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes.

Relevant facts and circumstances: You are registered for GST. You sell licence subscriptions to Australian entities. The supplies that are the subject of this ruling are taxable supplies. The billing application used for your business is able to issue a request for payment document that is a valid tax invoice. Intermittently, you may offer clients certain discounts or alternatively there may be a change in price. Current documentation issued upon an adjustment event is actually two documents together (separate tax invoice and associated document headed 'Adjustment Note'.) You provided the Australian Taxation Office (ATO) with a sample of an adjustment note and tax invoice accompanying the adjustment note. The tax invoice contains the following information: • The heading 'Tax Invoice' • Your name • Your ABN • The client name • What is supplied • The GST on each supply and the total GST amount for the invoice • The date the tax invoice is issued The adjustment note contains the following information: • The heading 'Adjustment Note' • An explanation for the adjustment • The amount of the adjustment to GST payable • The GST exclusive value of the price reduction • The GST adjustment and the GST-exclusive value of the price reduction are shown in a column headed (heading) A sample adjustment note you provided to the Australian Taxation Office (ATO) shows a credit for (specified reason). This is the difference in GST exclusive price. The document also shows a GST adjustment credit. The document headed 'Tax Invoice' that accompanies the document headed 'Adjustment Note' includes an Amount Due section that takes into account adjustments in price, adjustments in GST as well as any payments the customer may have made against the original tax invoice.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 29-20 | A New Tax System (Goods and Services Tax) Act 1999 section 29-75

Reasons for decision: Summary: The documents in question meet the requirements of paragraph 12 of Goods and Services Tax Ruling GSTR 2013/2. | Detailed Reasoning - Detailed reasoning: Subsection 29-75(1) of the GST Act states: An adjustment note for an *adjustment that arises from an *adjustment event relating to a *taxable supply: (a) must be issued by the supplier of the *taxable supply in the circumstances set out in subsection (2); and (b) must set out the *ABN of the entity that issues it; and (c) must contain such other information as the Commissioner determines in writing; and (d) must be in the approved form. However, the Commissioner may treat as an adjustment note a particular document that is not an adjustment note. Subsection 29-75(2) of the GST Act states: The supplier of the *taxable supply must: (a) within 28 days after the *recipient of the supply requests the supplier to give an *adjustment note for the *adjustment relating to the supply; or (b) if the supplier has issued a *tax invoice in relation to the supply (or the recipient has requested one) and the supplier becomes aware of the adjustment before an adjustment note is requested, within 28 days after becoming aware of that fact; give to the recipient an adjustment note for the *adjustment unless any *tax invoice relating to the supply would have been a *recipient created tax invoice (in which case it must be issued by the recipient). In accordance with subsection 29-20(3) of the GST Act, an adjustment note must be held before a decreasing adjustment arising from an adjustment event is claimed. In accordance with paragraph 12 of Goods and Services Tax Ruling GSTR 2013/2, an adjustment note is a document that complies with the following requirements: • it is issued by the supplier of the taxable supply (paragraph 29-75(1)(a)); • it sets out the ABN of the entity that issues it (paragraph 29-75(1)(b)); • it is in the approved form (paragraph 29-75(1)(d)); • it meets the information requirements that the Commissioner has determined under paragraph 29-75(1)(c) - for an adjustment note (other than a recipient created adjustment note). This requires that an adjustment note contains the following information, or enough information to enable the following to be clearly ascertained: • that the document is intended as an adjustment note and the effect of the adjustment; • the identity of the supplier or the supplier's agent; • the identity or ABN of the recipient, the recipient's agent, or another member of the recipient's GST group, if the adjustment note: - relates to a tax invoice showing the total price for the supply or supplies is at least $1,000 (or such higher amount as regulations made pursuant to subparagraph 29-70(1)(c)(ii) of the GST Act specify); or - arises out of an adjustment event where a supply that was not taxable becomes taxable and the price of the supply is at least $1,000 (or such higher amount as regulations made pursuant to subparagraph 29-70(1)(c)(ii) of the GST Act specify); • the issue date of the adjustment note; • a brief explanation of the reason for the adjustment; • the amount of the adjustment to the GST payable; • the difference between the price of the supply before the adjustment event and the price of the supply after the adjustment event. If the supply is not a wholly taxable supply, the price of the supply is referable to that part of the supply that is affected by the adjustment event and that is, or becomes, taxable. The document headed 'Adjustment Note' and accompanying tax invoice you issue is in combination a valid adjustment note. They contain all of the information required of adjustment notes. One of the requirements of an adjustment note is that it shows the difference in price, associated with the adjustment event or contain information for this to be clearly ascertained. Paragraph 41 of GSTR 2013/2 gives an example of how this requirement can be met. It states: 41 Alternatively, the adjustment note may show the difference in the price by including of any two of the following amounts: Difference in the GST exclusive price -$1,000 Difference in the GST inclusive price -$1,100 Amount of the adjustment to GST payable -$ 100 Note that paragraph 41 of GSTR 2013/2 provides that showing even just two of the amounts listed in that paragraph would be sufficient. Your adjustment notes show a credit for the GST exclusive value of a price reduction and a credit for the GST effect of the price adjustment. The amounts are shown in a column headed (heading). Therefore, two of the amounts listed in paragraph 41 of GSTR 2013/2 are shown on your adjustment notes. Hence, you meet the adjustment note requirement of showing the difference in price. Note that this ruling decision is not an exercise of Commissioner's discretion to treat a document as an adjustment note. It is not necessary for the ATO to consider exercising discretion to treat the relevant documents as an adjustment note, as they meet the requirements of an adjustment note for the purposes of the GST Act