Making an adjustment on your activity statement

Transcription

1 business SEGMENT businesses with a gst obligation AUDIENCE guide FORMAT NAT PRODUCT ID Making an adjustment on your activity statement How to make an adjustment of your net goods and services tax (GST) liability for a reporting period. Read this guide in conjunction with Goods and services tax how to complete your activity statement (NAT 7392). For more information visit

2 Our commitment to you We are committed to providing you with advice and information you can rely on. We make every effort to ensure that our advice and information is correct. If you follow advice in this publication and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we must still apply the law correctly. If that means you owe us money, we must ask you to pay it. However, we will not charge you a penalty or interest if you acted reasonably and in good faith. If you make an honest mistake when you try to follow our advice and you owe us money as a result, we will not charge you a penalty. However, we will ask you to pay the money, and we may also charge you interest. If correcting the mistake means we owe you money, we will pay it to you. We will also pay you any interest you are entitled to. You are protected under GST law if you have acted on any GST advice in this publication. If you have relied on GST advice in this publication and that advice later changes, you will not have to pay any extra GST for the period up to the date of the change. Similarly, you will not have to pay any penalty or interest. If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. The information in this publication is current at July We regularly revise our publications to take account of any changes to the law, so make sure that you have the latest information. If you are unsure, you can check for a more recent version on our website at or contact us. TERMS WE USE When we say: n sales we are referring to the GST term supplies n purchases we are referring to the GST term acquisitions n GST credits we are referring to the GST term input tax credits n reporting period we mean the tax period that applies to you n payment made or received, we are referring to the GST term consideration, and n business we are referring to the GST term enterprise. Commonwealth of Australia 2006 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney General s Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at published by Australian Taxation Office Canberra July 2006 JS 5243

3 contents making an ADJUSTMENT 2 What is an adjustment? 2 Types of adjustment 2 Completing your activity statement 7 When to make adjustments 7 Adjustment notes 7 Methods you may use to complete your activity statement 7 calculating an adjustment 3 Adjustments relating to sales 3 Adjustments relating to purchases 3 Adjustments for changes in the use of a purchase or importation for a creditable purpose 3 examples 8 Using the adjustment worksheets 8 WORKSHEETS 14 Annual apportionment ADJUSTMENT 5 Another adjustment arising prior to your annual apportionment adjustment 5 Another adjustment arising after your annual apportionment adjustment 5 Worksheet method purchases and importations subject to an annual apportionment election 5 More information inside back cover other adjustments 6 Other circumstances where adjustments may be required 6 Making an adjustment on your activity statement 1

4 making an ADJUSTMENT What is an adjustment? From time to time, you may need to make changes that increase or decrease your net GST liability for a reporting period. These changes are known as adjustments. There are two types of adjustments: n increasing adjustments, which increase your net GST liability for a reporting period, and n decreasing adjustments, which decrease your net GST liability for a reporting period. If you have made a mistake on a previous activity statement, your correction of that mistake is not classified as an adjustment. For instructions on how to correct previous mistakes, refer to Correcting GST mistakes (NAT 4700) or phone us on Types of adjustment This section discusses common adjustments that are relevant to all businesses. Adjustments that are less common, or apply only to certain businesses, are discussed under the heading Other adjustments on page 6. Adjustments for sales You may need to make an adjustment in the following circumstances: n a taxable sale you made is cancelled (for example, a customer returns defective goods to your business and you refund the purchase price) n the price of a taxable sale you made changes (for example, you provide a rebate to a customer) n you make a sale that becomes taxable (for example, goods sold GST-free for export are not exported within the required time and therefore the sale becomes taxable), or n you make a sale that stops being taxable. These are referred to as adjustment events. Bad debt adjustment If you account for GST on a non-cash basis, you may have an adjustment relating to a bad debt if: n you write off a bad debt relating to a taxable sale you made n you become aware that a debt relating to a taxable sale you made has been overdue for 12 months or more n you recover an amount for a bad debt you had already written off, or n you recover an amount relating to a taxable sale that was overdue for 12 months or more. Adjustments for purchases You may need to make an adjustment in the following circumstances: n a purchase you made is cancelled after you claimed a GST credit for the purchase on your activity statement (for example, you return goods you have purchased and receive a full refund) n the price of a purchase you made changes after you have claimed a GST credit for the purchase (for example, you receive a rebate) n you make a purchase that becomes a purchase you are entitled to claim a GST credit for, or n you make a purchase that stops being a purchase you are entitled to claim a GST credit for. These are referred to as adjustment events. Bad debt adjustment If you account for GST on a non-cash basis, you may have an adjustment relating to a bad debt if: n a debt you owe for a purchase you made that you were entitled to claim a GST credit for has either been overdue for more than 12 months or is written off as a bad debt, or n you pay a debt that has been overdue for 12 months or more, or that has been written off as a bad debt, and you were entitled to claim a GST credit for the purchase. Adjustments for changes in the use of a purchase or importation You may need to make an adjustment when your actual use of a purchase or importation differs from your intended use of that purchase or importation. If there is a change to a sale or a purchase that you make (for example, a price change) before you first account for that sale or purchase on an activity statement, you do not need to make an adjustment. Instead, you can take the change into account when first reporting the transaction on your activity statement. For example, for a price change you would include the final amended price on your activity statement. 2 Making an adjustment on your activity statement

5 calculating an adjustment adjustments relating to Sales If you have an adjustment relating to a sale you made, the amount of that adjustment is the difference between: 1 the actual GST you paid or were liable to pay on the original sale, and 2 the amount of GST that you would have been liable to pay on the original sale if the circumstance that led to the adjustment had been taken into account. If 1 is greater than 2, you have a decreasing adjustment, which decreases your net GST liability for the reporting period. If 2 is greater than 1, you have an increasing adjustment, which increases your net GST liability for the reporting period. This only applies to adjustments that arise in the circumstances described in the section Adjustments for sales on page 2. adjustments relating to Purchases If you have an adjustment relating to a purchase you made, the amount of that adjustment is the difference between: 1 the GST credit you claimed for your purchase, and 2 the amount of the GST credit you would have claimed for the purchase if the circumstance that led to the adjustment was taken into account. If 1 is greater than 2, you have an increasing adjustment, which increases your net GST liability for the reporting period. If 2 is greater than 1, you have a decreasing adjustment, which decreases your net GST liability for the reporting period. This only applies to adjustments that arise in the circumstances described in the section Adjustments for purchases on page 2. Adjustments for Changes in the use of a purchase or importation for a creditable purpose When we say that you use something for a creditable purpose we mean you use it in your business. However, you do not use the thing for a creditable purpose to the extent that it relates to making input taxed sales, or is private or domestic in nature. To ensure that you claim the correct amount of GST credit, you make adjustments for changes in the use of your purchases or importations. Depending on the GST-exclusive value of the thing purchased or imported, you may need to account for any change in use of the thing over a specified time period. For each adjustment period you have for a purchase or importation, you: 1 work out your actual use of the thing for a creditable purpose for the period starting from when you made the purchase or importation and ending at the end of the adjustment period (expressed as a percentage), and 2 compare this with: the extent (that is, the percentage) that you originally claimed you used, or would use, the purchase or importation for a creditable purpose (that is, your intended use of the thing if this is the first adjustment period), or the extent (that is, the percentage) that you actually used your purchase or importation for a creditable purpose worked out at the time of your last adjustment (that is, your former use of the thing if this is not the first adjustment period). If there is no difference between 1 and 2, you do not have an adjustment for that adjustment period. If there is a difference between 1 and 2, you have an adjustment for that adjustment period. If your actual use of a purchase or importation for a creditable purpose is greater than your intended use, or former use, of the thing for a creditable purpose, you have a decreasing adjustment. If your actual use of a purchase or importation for a creditable purpose is less than your intended use, or former use, of the thing for a creditable purpose, you have an increasing adjustment. What is an adjustment period for the change of use of a purchase or importation? An adjustment period for a purchase or importation is a reporting period that: n starts at least 12 months after the end of the reporting period in which you claimed your GST credit (or would have claimed the credit if you were entitled to), and n ends on 30 June (if you do not have a reporting period that ends on 30 June, choose the reporting period that ends closest to this day). If your GST registration is cancelled, your final reporting period is also an adjustment period for the purchase or importation. The amount of the GST credit you claim depends on the extent to which the purchase or importation is for a creditable purpose. The extent to which you use a purchase or importation for a creditable purpose may change over time. That is, you may use the purchase or importation to a greater, or lesser, extent for a creditable purpose than you intended. Making an adjustment on your activity statement 3

6 calculating an adjustment Example 1 Bob purchases a computer system for his GST registered business on 12 March The purchase is subject to two adjustment periods. Bob reports and pays GST quarterly and claims a GST credit in the reporting period 1 January 2004 to 31 March Therefore, Bob s first adjustment period is the reporting period 1 April 2005 to 30 June To work out if there is an adjustment in that reporting period, Bob must compare: n the extent that he actually used the computer for a creditable purpose for the period 12 March 2004 to 30 June 2005 (expressed as a percentage), with n the extent (if any) that he intended to use the computer for a creditable purpose (expressed as a percentage). Bob s second adjustment period is the reporting period 1 April 2006 to 30 June To work out if there is an adjustment in that reporting period, Bob must compare: n the extent that he actually used the computer for a creditable purpose for the period 12 March 2004 to 30 June 2006 (expressed as a percentage), with n the former use of the computer for a creditable purpose worked out by Bob for the period 12 March 2004 to 30 June 2005 (that is, the percentage worked out for the first adjustment period). How many adjustment periods do I have? Purchases or importations that you make are assigned a number of adjustment periods in which you make adjustments for changes in the use of your purchases or importations. The number of adjustment periods depends on the GST-exclusive value of the purchase or importation. There are different adjustment periods for purchases or importations relating to business finance (that is, purchases or importations, which at the time of purchase or importation, relate to making financial supplies and are not of a private or domestic nature). If the adjustment period is 0 you do not need to make any adjustments for a change in use of your purchase or importation. Adjustment periods for purchases and importations that do not relate to business finance are as follows: GST-exclusive value of purchase or importation Number of adjustment periods $1,000 or less 0 $1,001 to $5,000 2 $5,001 to $499,999 5 $500,000 or more 10 Adjustment periods for purchases and importations that do relate to business finance are as follows: GST-exclusive value of purchase or importation Number of adjustment periods $10,000 or less 0 $10,001 to $50,000 1 $50,001 to $499,999 5 $500,000 or more 10 For more information refer to the following goods and services tax rulings: n Goods and Services Tax Ruling GSTR 2000/1 Goods and services tax: adjustment notes n Goods and Services Tax Ruling GSTR 2000/2 Goods and services tax: adjustments for bad debts n Goods and Services Tax Ruling GSTR 2000/19 Goods and services tax: making adjustments under Division 19 for adjustment events n Goods and Services Tax Ruling GSTR 2000/24 Goods and services tax: Division 129 making adjustments for changes in extent of creditable purpose n Goods and Services Tax Ruling GSTR 2006/3 Goods and services tax: determining the extent of creditable purpose for providers of financial supplies, and n Goods and Services Tax Ruling GSTR 2006/4 Goods and services tax: determining the extent of creditable purpose for claiming input tax credits and for making adjustments for changes in extent of creditable purpose. 4 Making an adjustment on your activity statement

7 Annual apportionment ADJUSTMENT If eligible, you can make an annual apportionment election. If you make the election it means you can claim a full GST credit for a purchase or importation you make that is partly for creditable purposes and partly for private purposes. That is, you do not need to estimate the extent you intend to use your purchase or importation for private purposes when claiming your GST credit. However, the election does not allow you to claim a GST credit for: n a purchase or importation, to the extent that it relates to making input taxed sales n a purchase or importation that is solely private or domestic in nature, or n a purchase (acquisition) that is a reduced credit acquisition. Reduced credit acquisitions are purchases (acquisitions) of certain types of things that relate to making input taxed financial supplies and for which you can claim a reduced GST credit. For more information, refer to Goods and Services Tax Ruling GSTR 2004/1 Goods and services tax: reduced credit acquisitions. For purchases or importations the election applies to, you will have to make an increasing adjustment in a later reporting period to account for the private use of the purchases or importations. The adjustment will increase the amount of GST you are liable to pay (or reduce your GST refund) for the reporting period in which you make the adjustment. You must make the increasing adjustment in your activity statement that covers the last day on which your income tax return is due, or you may choose to make the adjustment in an activity statement for an earlier reporting period. An adjustment event or bad debt adjustment (see page 2) may have an effect on your annual apportionment adjustment for a particular purchase. This depends on whether the adjustment arises before or after you make your annual apportionment adjustment on your activity statement. Another adjustment arising prior to your annual apportionment adjustment Prior to you making an annual apportionment adjustment for your purchase, the amount of an adjustment arising from an adjustment event or a bad debt adjustment is calculated as though there was no private use of the purchase. You account for any private use of the purchase at a later time when you make your annual adjustment, taking into account the effect of the earlier adjustment. If, for example, the purchase was cancelled or the whole amount was written off as a bad debt (that is, subject to a bad debt adjustment) you no longer need to make an annual apportionment adjustment. This is because the earlier increasing adjustment has overridden the need to make an annual apportionment increasing adjustment in respect of that purchase. Another adjustment arising after your annual apportionment adjustment If an adjustment arises from another adjustment event or bad debt adjustment after you have made an annual apportionment adjustment, the amount of that adjustment is calculated taking into account the private use of the purchase. For example, if a purchase, which is subject to an annual apportionment election, is written off as a bad debt after you have made an annual apportionment increasing adjustment to account for the private use of that purchase, you would only need to make a bad debt adjustment to the extent that the purchase had been used for a creditable purpose. You may also need to make later adjustments to account for changes in use as explained on pages 2 3. Worksheet method purchases and importations subject to an annual apportionment election If you use the adjustment worksheets (pages 15 18) to calculate your net adjustments for a reporting period, use the row labeled Other adjustments on the adjustments summary worksheet (page 18) to show annual apportionment adjustments. In order to use the adjustments summary worksheet to account for annual apportionment adjustments, you first need to calculate the amount of the increasing adjustment from your records and include only this amount on the worksheet in the increasing adjustment column. For adjustments relating to bad debts (see page 2) you use the bad debts worksheet (page 16). However, if a bad debt adjustment occurs prior to any annual apportionment adjustment, you complete column (3) of the bad debt worksheet without reducing the amount of the bad debt for that part of the purchase or importation that is, or was, subject to annual apportionment. For an adjustment event relating to a purchase (see page 2) you use the purchases worksheet (page 15). However, if the adjustment event occurs prior to any annual apportionment adjustment, you complete columns (2) and (3) without reducing the amount for that part of the purchase or importation that is, or was, subject to annual apportionment. For information on how to calculate an annual apportionment adjustment refer to GST and annual private apportionment (NAT 12877). Making an adjustment on your activity statement 5

8 other adjustments Other circumstances where adjustments may be required There are several other types of GST adjustments besides those already described. Some of the other circumstances in which you may have to make an adjustment are described below. Company amalgamations When two or more companies amalgamate and continue as one company (the amalgamated company), the amalgamated company is responsible for the adjustments that any of the companies would have had if they didn t amalgamate. This includes a change of creditable purpose by the amalgamated company compared with the relevant company prior to amalgamation. However, this does not include adjustments that the companies were required to make before they amalgamated. Sales of things either used for private purposes or to make financial supplies If you purchased or imported something that you were not entitled to claim a full GST credit for because it was used: n solely or partly for private or domestic purposes, or n for making financial supplies, you may have a decreasing adjustment if you later sell the thing in a taxable sale. Sales of going concerns If you purchase a going concern (business), and the sale to you is a GST-free sale of a going concern, you may have an increasing adjustment if you intend that some or all of the sales made through that business will be sales that are neither taxable nor GST-free. You may later need to make increasing or decreasing adjustments if this proportion changes over time. Unredeemed vouchers If you sell a voucher in return for payment and the holder of the voucher can redeem it for something up to the monetary value stated on the voucher, you may have an increasing adjustment if: n the voucher has not been redeemed, and n you have, for accounting purposes, written back to current income any reserves for the redemption of the voucher. Tradex Scheme goods If you are the holder of a Tradex order, you may have an increasing adjustment if goods relating to that order are dealt with contrary to the Tradex Scheme. Becoming registered for GST If you become registered or required to be registered for GST, you may have a decreasing adjustment for stock you have already purchased. Cancellation of GST registration If you cease to be registered for GST, you may have to make increasing adjustments if you claimed, or were entitled to claim, GST credits for assets that you still have on hand at the time the cancellation of your GST registration takes effect. This is because these assets will no longer be used to make sales that fall within the GST system. For more information refer to the following: n Goods and Services Tax Ruling GSTR 2000/19 Goods and services tax: making adjustments under Division 19 for adjustment events n Goods and Services Tax Ruling GSTR 2002/5 Goods and services tax: when is a supply of a going concern GST-free? n Goods and Services Tax Ruling GSTR 2003/5 Goods and services tax: vouchers n Goods and Services Tax Ruling GSTR 2004/8 Goods and services tax: when does an entity have a decreasing adjustment under Division 132? n Goods and Services Tax Advice GSTA TPP 017 Goods and services tax: Does a credit card chargeback by a financial institution against a merchant give rise to an adjustment event for the merchant? n Goods and Services Tax Advice GSTA TPP 018 Goods and services tax: Can an interest charge be a change in consideration and therefore an adjustment event (as opposed to a financial supply)? n Goods and Services Tax Advice GSTA TPP 092 Goods and services tax: If a vendor sells a farm as a GST-free supply of a going concern and the farmland includes residential premises that are not part of the business, is an adjustment required under Division 135 of the GST Act? n Goods and Services Tax Advice GSTA TPP 094 Goods and services tax: How is the final adjustment calculated when a building is renovated and the owner s GST registration is cancelled? n Goods and Services Tax Advice GSTA TPP 095 Goods and services tax: Are there circumstances in which repairs and additions to plant and equipment are not included as assets for the purposes of an increasing adjustment under Division 138 of the GST Act upon cessation of registration? n Goods and Services Tax Advice GSTA TPP 096 Goods and services tax: Is there an increasing adjustment under Division 138 of the GST Act if an entity carrying on a farming business undertakes improvements to its farm land and subsequently cancels its GST registration? n Cancelling your GST registration fact sheet (NAT 3844). 6 Making an adjustment on your activity statement

9 Completing your activity statement When to make adjustments If you are required to make an adjustment because of an adjustment event (refer to page 2), you normally include the adjustment in the activity statement for the reporting period in which you become aware of the adjustment. The timing of adjustments for change in use of a purchase or importation is explained on pages 3 4. You report as an adjustment only the amount you pay during your reporting period if: n you account on a cash basis for GST, n you have an adjustment arising from an adjustment event, and n as a result of the adjustment event, you must make a payment. This means that if you do not pay anything in a reporting period, you do not report an adjustment amount. For more information on cash and non-cash accounting, see: n Chapter 5 of Goods and services tax how to complete your activity statement (NAT 7392), and n Cash and non-cash accounting (NAT 3136). Adjustment notes Generally, you must hold a valid adjustment note before you can make a decreasing adjustment arising from an adjustment event. You include the decreasing adjustment in the reporting period in which you first hold the adjustment note. However, even if you hold a document that states it is an adjustment note, you cannot make a decreasing adjustment if the purchase did not include GST. You are not required to hold an adjustment note if the cost of the item is $55 (GST-inclusive) or less. There may be other circumstances where you are also not required to hold an adjustment note. Methods you may use to complete your activity statement You may use either the accounts method or the calculation worksheet method to complete the relevant boxes on your activity statement for the reporting period. If you use the accounts method, you determine the GST amounts for your sales and purchases from your accounts. These amounts are reported, net of any adjustments, on your activity statement. If you use the calculation worksheet method you can either: n include the amount of the adjustment multiplied by 11 on the calculation worksheet at G7 (adjustments) if the adjustment is an increasing adjustment or G18 (adjustments) if the adjustment is a decreasing adjustment, or n determine the net amount of your adjustments using the adjustment worksheets provided in this guide. The worksheets allow you to record all adjustments for the reporting period. At the end of the period, total increasing adjustments are compared to total decreasing adjustments. You will then need to include the difference at either G7 or G18 on the calculation worksheet. This option is illustrated by way of example on pages The amounts you report on your activity statement will depend on the accounting basis (that is, cash basis or non-cash basis) you have chosen or are otherwise required or permitted to use for GST purposes. For more information about the accounts method or the calculation worksheet method, refer to Goods and services tax how to complete your activity statement (NAT 7392). For more information on adjustment notes, refer to Goods and Services Tax Ruling GSTR 2000/1 Goods and services tax: adjustment notes. Making an adjustment on your activity statement 7

10 examples Using the adjustment worksheets If you choose to use the calculation worksheet method along with the adjustment worksheets to calculate your net adjustments for a reporting period, follow the steps below. You may like to photocopy the worksheets on pages to use in calculating your net adjustment. Step 1 Complete the sales worksheet. EXAMPLE: Sales worksheet Jim and Maria operate a hardware store. They previously sold a toolbox to Alex and included the amount for the taxable sale of $350 on a previous activity statement. Alex returns the toolbox when he finds it is not suitable and Jim and Maria agree to refund the full sale price. Jim and Maria show the refund against Cancellation of a sale on the worksheet, as shown below. Brian is a tradesman and puts his purchases from Jim and Maria on a monthly account. In the previous reporting period Jim and Maria made taxable sales on credit to Brian of $3,600. Jim and Maria included this amount on their previous activity statement. When Brian pays his account on time, Jim and Maria offer a discount of 3%, or $108. Jim and Maria show the discount against Reduction in amount for a sale because of a discount or rebate on the worksheet, as shown below. SALES WORKSHEET (1) (2) (3) (4) (5) Adjustment for sales Amount for sales (before the change occurred) included at G1 New amount for sales Increasing adjustment Fill in this column if (3) is more than (2). Subtract (2) from (3). Decreasing adjustment Fill in this column if (2) is more than (3). Subtract (3) from (2). $ $ $ $ Cancellation of a sale Reduction in amount for a sale because of a discount or rebate 3,600 3, Sale has stopped being taxable Increase in amount for a sale Sale has become taxable Total 458 Transfer these totals to line 1 of adjustments summary worksheet. Step 2 Transfer the totals from columns (4) and (5) of the sales worksheet to line 1 of the adjustments summary worksheet on page Making an adjustment on your activity statement

11 examples Step 3 Complete the purchases worksheet. EXAMPLE: Purchases worksheet Jim and Maria return to their supplier electrical tools which customers have found to be faulty. The tools cost them $620, which they included on a previous activity statement to claim GST credits. Jim and Maria show the amount to be refunded to them against Cancellation of a purchase on the worksheet, as shown below. Jim and Maria sold a substantial number of mowers for $10,000 in the previous period for which they claimed GST credits. They receive a volume rebate of $830 from their supplier. Jim and Maria show the amount of rebate received from their supplier against Reduction in purchase price because of a discount or rebate on the worksheet, as shown below. purchases WORKSHEET (1) (2) (3) (4) (5) Adjustment for purchases Purchase price (before the change occurred) included at G10 or G11 Changed purchase price Increasing adjustment Fill in this column if (2) is more than (3). Subtract (3) from (2). Decreasing adjustment Fill in this column if (3) is more than (2). Subtract (2) from (3). $ $ $ $ Cancellation of a purchase Reduction in purchase price because of a discount or rebate 10,000 9, A purchase stops being creditable Increase in purchase price A purchase has become creditable Total 1,450 Transfer these totals to line 2 of adjustments summary worksheet. Step 4 Transfer the totals from columns (4) and (5) of the purchases worksheet to line 2 of the adjustments summary worksheet on page 13. Making an adjustment on your activity statement 9

12 examples Step 5 Complete the bad debts worksheet. EXAMPLE: Bad debts worksheet Jim and Maria sold building materials to Craig in a previous reporting period, which Craig is unable to pay for. Jim and Maria included $1,500 in taxable sales to Craig on previous activity statements. As they are not able to collect any of the debt, they write it off in their accounts. Jim and Maria show the amount written off against Writing off bad debts or debts overdue for 12 months or more on the worksheet, as shown below. Some time ago Maria sold some timber to Dianne, who was renovating her home. It was a taxable sale for which they had accounted for GST. When they were unable to collect the debt, Jim and Maria wrote it off and made an adjustment on their activity statement for that previous period. Dianne s financial circumstances have improved and she makes a part payment of $300. Jim and Maria show the amount received against Recovering bad debts written off or debts overdue for 12 months or more on the worksheet, as shown below. Bad debts WORKSHEET (1) (2) (3) (4) (5) Sales Purchases Amount written off or recovered Increasing adjustment Decreasing adjustment Same as in (3). $ $ $ Writing off bad debts or debts overdue for 12 months or more. 1,500 1,500 Recovering bad debts written off or debts overdue for 12 months or more Bad debts written off by your supplier or debts overdue for 12 months or more. Payment of bad debts written off by your supplier or debts overdue for 12 months or more. Total 300 1,500 Transfer these totals to line 3 of adjustments summary worksheet. If a bad debt relates to a partly taxable sale or a purchase which is partly for a creditable purpose, the amount of the adjustment is reduced accordingly. Step 6 Transfer the totals from columns (4) and (5) of the bad debts worksheet to line 3 of the adjustments summary worksheet on page Making an adjustment on your activity statement

13 examples Step 7 Complete the creditable purpose worksheet. Do not make an adjustment under this step if you intend to make an adjustment under step 9 for the same purchase. EXAMPLE: Adjustments for change in extent of creditable purpose Jim and Maria purchased a vehicle for $35,000 for use in their business. However, as they intended to also use it for private purposes they did not claim the full GST credit for the purchase. (Jim and Maria have not made an annual apportionment election.) They estimated the extent of business use at the time of purchase to be 60%. At the end of the first adjustment period for the vehicle, Jim and Maria have found from their log book that the vehicle has actually been used 75% for business purposes since it was acquired. Therefore they make an adjustment for a change in extent of creditable purpose on the worksheet, as shown below. creditable purpose WORKSHEET (1) (2) (3) (4) (5) (6) (7) (8) Description of purchase Date aquired Full purchase price (taking into account adjustments) Intended (or previously claimed) extent of creditable purpose Actual extent of creditable purpose Change in extent of creditable purpose Increasing adjustment Fill in this column if (4) is more than (5). Multiply the amount in (3) by the % in (6). Decreasing adjustment Fill in this column if (5) is more than (4). Multiply the amount in (3) by the % in (6). $ % % % $ $ Vehicle 35, ,250 Total 5,250 Transfer these totals to line 4 of adjustments summary worksheet. The increase in the percentage of business use is 15% (75% minus 60%). The adjustment calculated is 15% of $35,000, that is, $5,250. As the value of the purchase was more than $5,000 but less than $50,000 and did not relate to business finance, Jim and Maria have a total of five adjustment periods in which to track the use of the purchase. Step 8 Transfer the totals from columns (7) and (8) of the creditable purpose worksheet to line 4 of the adjustments summary worksheet on page 13. Making an adjustment on your activity statement 11

14 EXAMPLES Step 9 Work out adjustments for goods you use for a private purpose If you made a purchase or an importation of goods (such as items of trading stock) solely for a business purpose (for which you claimed GST credits), and you subsequently use the goods solely for a private or domestic purpose, you have an increasing adjustment. The amount to be included as an adjustment at this step is the amount that was previously included at G10 (capital purchases) or G11 (non-capital purchases) on your activity statement for those goods. This amount is shown in line 5 of the adjustments summary worksheet. Do not make an adjustment under this step if you have made an adjustment under step 7 for the same goods in this reporting period or any previous reporting period. Step 10 Work out any other increasing or decreasing adjustments and multiply by 11. Step 11 Transfer the totals to the relevant line (see lines 6 to 10) of the adjustments summary worksheet. 12 Making an adjustment on your activity statement

15 EXAMPLES EXAMPLE: Adjustments summary worksheet Jim and Maria have several adjustments which are calculated using the various adjustment worksheets. They use the adjustments summary worksheet to work out their overall adjustment for the reporting period. They transfer the amount of $5,458 to G18 (adjustments) on their calculation worksheet. adjustments summary worksheeet Line Reason for adjustment Increasing adjustment Decreasing adjustment Adjustments which you can work out using these instructions $ $ 1 Adjustments for sales following adjustment events Adjustments for purchases following adjustment events 1,450 3 Bad debts written off or recovered 300 1,500 4 Change in extent of creditable purpose 5,250 5 Goods used solely for private or domestic purposes Adjustments that may require more information 6 Insurance settlements 7 Company amalgamations 8 Sales of things used to make financial supplies or used privately 9 Sales of going concerns 10 Other adjustments 11 Total A 1,750 B 7,208 If A is more than B, subtract B from A and show the amount at G7 If B is more than A, subtract A from B and show the amount at G18 5,458 Step 12 Transfer the net amount to G7 if you have a net increasing adjustment, or G18 if you have a net decreasing adjustment on your calculation worksheet. Do not enter an amount at both G7 and G18. Making an adjustment on your activity statement 13

16 WORKSHEETS SALES WORKSHEET (1) (2) (3) (4) (5) Adjustment for sales Amount for sales (before the change occurred) included at G1 1 New amount for sales 1 Increasing adjustment Fill in this column if (3) is more than (2). Subtract (2) from (3). Decreasing adjustment Fill in this column if (2) is more than (3). Subtract (3) from (2). $ $ $ $ Cancellation of a sale Reduction in amount for a sale because of a discount or rebate Sale has stopped being taxable 2 Increase in amount for a sale Sale has become taxable 3 Total Transfer these totals to line 1 of adjustments summary worksheet. 1 If the sale was partly taxable, include only the amount for the taxable part of the sale. 2 If the sale was previously taxable and stops being taxable, show zero in column (3). 3 If the sale was previously non-taxable and has become taxable, show zero in column (2). 14 Making an adjustment on your activity statement

17 purchases WORKSHEET (1) (2) (3) (4) (5) Adjustment for purchases Purchase price (before the change occurred) included at G10 or G11 1 Changed purchase Increasing adjustment price 1 Fill in this column if (2) is more than (3). Subtract (3) from (2). Decreasing adjustment Fill in this column if (3) is more than (2). Subtract (2) from (3). $ $ $ $ Cancellation of a purchase Reduction in purchase price because of a discount or rebate A purchase stops being creditable 2 Increase in purchase price A purchase has become creditable 3 Total Transfer these totals to line 2 of adjustments summary worksheet. 1 If the purchase was partly creditable, include only the amount for the creditable part of the purchase. 2 If the purchase was previously creditable and stops being creditable, show zero in column (3). 3 If the purchase was previously not creditable and has become creditable, show zero in column (2). Making an adjustment on your activity statement 15

18 Bad debts WORKSHEET (1) (2) (3) (4) (5) Amount written off Increasing adjustment Decreasing adjustment or recovered 1 Same as in (3). $ $ $ Sales Writing off bad debts or debts overdue for 12 months or more. Recovering bad debts written off or debts overdue for 12 months or more. Purchases Bad debts written off by your supplier or debts overdue for 12 months or more. Payment of bad debts written off by your supplier or debts overdue for 12 months or more. Total Transfer these totals to line 3 of adjustments summary worksheet. 1 If the bad debt relates to a partly taxable sale, or a purchase which is partly for a creditable purpose, include only the amount that is written off or recovered for the taxable part of the sale, or the amount that is written off or paid for the creditable part of the purchase. 16 Making an adjustment on your activity statement

19 worksheets creditable purpose WORKSHEET (1) (2) (3) (4) (5) (6) (7) (8) Description of purchase Date aquired Full purchase price (taking into account adjustments) Intended (or previously claimed) extent of creditable purpose Actual extent of creditable purpose Change in extent of creditable purpose Increasing adjustment Fill in this column if (4) is more than (5). Multiply the amount in (3) by the % in (6). Decreasing adjustment Fill in this column if (5) is more than (4). Multiply the amount in (3) by the % in (6). $ % % % $ $ Total Transfer these totals to line 4 of adjustments summary worksheet. Making an adjustment on your activity statement 17

20 worksheets adjustments summary worksheeet Line Reason for adjustment Increasing adjustment Decreasing adjustment Adjustments which you can work out using these instructions $ $ 1 Adjustments for sales following adjustment events 2 Adjustments for purchases following adjustment events 3 Bad debts written off or recovered 4 Change in extent of creditable purpose 5 Goods used solely for private or domestic purposes Adjustments that may require more information 6 Insurance settlements 7 Company amalgamations 8 Sales of things used to make financial supplies or used privately 9 Sales of going concerns 10 Other adjustments 11 Total A B If A is more than B, subtract B from A and show the amount at G7 If B is more than A, subtract A from B and show the amount at G18 18 Making an adjustment on your activity statement

21 Making an adjustment on your activity statement 19

22 20 Making an adjustment on your activity statement

23 more information For more information: n visit our website at n phone n obtain a fax by phoning , or n write to us at PO Box 9935 in your capital city. If you do not speak English well and want to talk to a tax officer, phone the Translating and Interpreting Service on for help with your call. If you have a hearing or speech impairment and have access to appropriate TTY or modem equipment, phone If you do not have access to TTY or modem equipment, phone the Speech to Speech Relay Service on

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