A New Tax System (Goods and Services Tax) (Correcting GST Errors) Determination 2023

The determination revolves around a series of precisely defined concepts. An error is defined as either a credit error or a debit error, but expressly excludes two categories: a mistake that relates to an input tax credit where entitlement has ceased under Division 93 of the GST Act; and a mistake relating to an amount that the Commissioner need not refund under section 105-65 of Schedule 1 to the Taxation Administration Act 1953 (TAA) (a provision that, though repealed, continues to apply for tax periods starting on or before 30 May 2013). The definition also carries a cross-reference to subsections 29-10(4) and 142-10 of the GST Act, noting that in circumstances where those provisions apply, there is no error for the purposes of the instrument, regardless of any mistake, because the assessed net amount for the earlier period will not be overstated. A credit error is a mistake that, taken as the only mistake in the tax period, would result in the assessed net amount being overstated; the credit error amount is the amount of that overstatement. Conversely, a debit error is a mistake that would result in the assessed net amount being understated; the debit error amount is the amount of that understatement. The net sum of the debit errors is a critical limit: it is the total of all debit error amounts included in the later period, reduced by any credit error amounts also included in that later period. This net sum must be less than the debit error value limit that applies based on the entity’s current GST turnover (the turnover at the time the entity lodges the correction return, not the turnover in the error period). The value limits range from $12,500 for turnover below $20 million, up to $560,000 for turnover of $1 billion and over. The debit error time limit also varies by turnover: 18 months after the due date of the GST return for the period in which the error was made for entities with turnover under $20 million, and 12 months for all other turnover categories. For GST groups, the current GST turnover is calculated by including supplies made by you and any other group members under subsection 188-15(2) of the GST Act. A compliance activity is defined as any examination of your GST affairs except one that the Commissioner notifies you in writing is not a compliance activity for the purposes of the instrument. It begins when the Commissioner advises you of an examination and ends when a notice of assessment or amended assessment is given, or the Commissioner advises that the examination has been finalised. This definition captures reviews, audits, verification checks, record-keeping reviews or audits, and other similar activities. The period of review and related terms such as assessed net amount, assessment, GST return, net amount and tax period are taken from Division 195 of the GST Act.

The determination directly affects any entity that is registered or required to be registered for GST and that makes mistakes in calculating its net amount for a tax period. This includes individuals, partnerships, companies, trusts, superannuation funds, government entities, and charitable institutions, provided they are within the GST system. It also affects GST groups, where the group’s current GST turnover is determined by aggregating supplies made by all group members. The turnover thresholds (less than $20 million, $20 million to less than $100 million, $100 million to less than $500 million, $500 million to less than $1 billion, and $1 billion and over) mean that the determination applies across the full spectrum of business sizes, but the compliance conditions tighten significantly for larger enterprises. Small businesses with turnover under $20 million receive the most generous debit error time limit (18 months) but the lowest value limit ($12,500), while large enterprises with turnover of $1 billion or more have a more compressed time limit (12 months) but a much higher value limit ($560,000). Entities with turnover below $20 million may be more likely to have errors that fall under the value limit, but they also need to be conscious of the shorter time limit that applies to credit errors (via the period of review condition in section 6(c)). The determination also affects tax agents and BAS lodgement service providers, who must understand the conditions to advise correctly. The Commissioner of Taxation is the administrator; the instrument is a legislative instrument made by the Deputy Commissioner under delegation. The repeal of the 2013 Determination means that any entity previously relying on the old instrument must now ensure compliance with the 2023 version. The determination does not apply to errors made in tax periods starting before 1 July 2012 (section 6(b)). Entities with errors from those earlier periods must use the ordinary amendment process under the TAA. The exclusion of errors involving Division 93 of the GST Act (cessation of input tax credit entitlement) and section 105-65 of the TAA (overpayments that the Commissioner may retain) means that entities dealing with those specific types of mistakes cannot use this correction pathway. Finally, the determination affects entities that have been notified of a compliance activity: if the error relates to a matter under examination, the entity cannot correct that error under the instrument unless the Commissioner gives written permission. This places an onus on entities to monitor ATO notifications carefully.

The determination confers a discretionary right to correct an error in working out the net amount for a later tax period, provided all conditions are satisfied. That right is subject to important duties and limitations. The primary duty is to ensure that none of the exclusionary conditions in section 6 is triggered. For both credit and debit errors, the entity must lodge the later-period GST return within the period of review for the assessment of the earlier period (section 6(c)). This means the entity must act before the Commissioner loses the power to amend the earlier assessment, which is generally four years from the date of the original assessment for most taxpayers (under the TAA). A further duty arises if the error relates to a matter that is, or was, subject to a compliance activity: the entity must not correct the error unless the Commissioner has given written notification that the correction may be made (section 6(d)(ii)). This prevents a taxpayer from self-correcting an error that is already under scrutiny. The entity also has a duty not to have previously corrected the same error, to any extent, in another tax period (section 6(e)). This prevents double counting or multiple partial corrections. For debit errors only, section 7 imposes three additional duties. First, the error must not have been a result of recklessness as to the operation of a GST law or intentional disregard of a GST law (section 7(a)). This requires the entity to assess its own conduct when the error was made; if there was a wilful or reckless disregard, the debit error cannot be corrected under this instrument, and the entity must instead lodge an amended return, which may attract penalties. Second, the correction must be included in a GST return lodged within the debit error time limit corresponding to the entity’s current GST turnover (section 7(b)). Third, the net sum of the debit errors (i.e., total debit amounts less any credit amounts also being corrected in the same period) must be less than the debit error value limit for that turnover bracket (section 7(c)). The entity therefore has a duty to calculate its current GST turnover accurately, monitor time limits, and aggregate errors across both debit and credit types when working out the net sum. The determination does not impose a separate duty to keep records; however, the normal record-keeping obligations under the GST Act and TAA apply, and an entity would be well advised to document the calculation of the net sum and the basis for concluding the error was not reckless or intentional. Section 8 imposes a negative duty: the entity cannot correct the error by requesting an amendment of an assessment for a later tax period. This closes off an alternative self-help method and forces the entity to use the correction pathway (or, for errors outside the instrument, the ordinary amendment route for the earlier period).

The determination itself does not create penalty provisions; it is an enabling instrument that sets conditions under which a self-correction is allowed. However, failure to meet those conditions may result in the self-correction being invalid, with consequences arising under the GST Act or the TAA. If an entity includes a debit error correction in a later return but does not satisfy one of the conditions in section 7 (for example, if the net sum of debit errors exceeds the value limit, or if the correction is made after the relevant time limit), the correction will not be authorised by the determination. The Commissioner would then treat the later period assessment as if the correction had not been made, and the original error in the earlier period would remain uncorrected. The entity could then face shortfall interest charges and administrative penalties under the TAA for the underpaid amount in the earlier period, because the entity has self-assessed a net amount for the later period that is less than the correct amount. Conversely, an unauthorised correction that results in an overstatement of the net amount in the later period (i.e., a credit error correction not within section 6) could lead to a shortfall penalty if the entity later amends or the Commissioner adjusts. The condition in section 7(a) - that the error must not be a result of recklessness or intentional disregard of a GST law - is a gatekeeper. If the Commissioner later determines that the original debit error did involve recklessness or intentional disregard, the correction under the determination is invalid, and the entity is liable for the full penalty framework under the TAA (which for intentional disregard can be up to 75 per cent of the shortfall, plus interest). The definition of compliance activity in section 4 is also linked to enforcement: if an entity corrects an error while a compliance activity is underway (without the Commissioner’s written permission), the correction is not authorised, and the Commissioner may use information obtained during the activity to assess the original period correctly and impose penalties. The determination does not provide any amnesty from penalties; it merely provides a safe harbour for corrections that meet the conditions, meaning the entity will not need to request an amended assessment and may avoid some administrative burden. But the underlying conduct that led to the error (negligence, recklessness, intentional disregard) can still be subject to penalty if it comes to light through other means. The repeal of the 2013 Determination does not retroactively affect corrections made under that instrument, but entities that relied on the old determination must now use the new one for any new corrections.

The determination is made under subsection 17-20(1) of the GST Act, which gives the Commissioner power to determine how and when errors may be corrected in working out net amounts. It sits within the broader GST law and is a legislative instrument registered under the Legislation Act 2003. Its operation is contingent on the definition of key terms imported from Division 195 of the GST Act, including assessed net amount, assessment, current GST turnover, GST group, GST return, net amount, period of review and tax period. The period of review condition in section 6(c) links directly to the assessment amendment framework in Part 4-20 of Schedule 1 to the TAA. The period of review is generally the period within which the Commissioner may amend an assessment, and within which a taxpayer may object or request an amendment. By requiring the error to be corrected within that period, the determination ensures that the Commissioner’s ability to assess the earlier period is not prejudiced. The exclusion of errors relating to Division 93 of the GST Act (input tax credit entitlement cessation) means that entities cannot use the self-correction pathway for those specific types of errors; they must instead rely on the amendment and refund provisions in the GST Act and TAA. Similarly, the exclusion of amounts the Commissioner need not refund under section 105-65 of Schedule 1 to the TAA (which, though repealed, continues to apply for pre-30 May 2014 tax periods) means that entities with very old overpayments that were already retained by the Commissioner cannot use this determination to reverse that outcome. The determination also interacts with the provisions on assessments and amended assessments in the GST Act (sections 17-5, 17-10, 17-15). Generally, a GST return is treated as an assessment; the determination allows a correction without requiring a formal amendment of the earlier assessment, but only if the correction is made in a later period. Section 8 reinforces this by expressly prohibiting the alternative of requesting an amendment of a later period assessment - the only permissible method under the determination is to include the correction in the net amount of the later period when lodging that period’s return. The determination also interacts with the general anti-avoidance provisions (Part IVA of the TAA, and GST-specific anti-avoidance rules in Division 165 of the GST Act). While the determination is not an anti-avoidance provision, corrections made under it must still be for genuine errors; if the pattern of corrections indicates a scheme, the Commissioner may apply anti-avoidance rules to the correction period. For GST groups, the definition of current GST turnover in the notes to section 7 adopts subsection 188-15(2) of the GST Act, which aggregates supplies of all group members. This means a large group cannot use the small business value limits by fragmenting its turnover within the group.

The determination itself has not been amended since its commencement. It was registered on 6 September 2023 and commences the day after registration (section 2). However, it is a replacement instrument. Schedule 1 repeals the Goods and Services Tax: Correcting GST Errors Determination 2013, which was the predecessor instrument. The 2013 Determination is entirely repealed, meaning any ongoing corrections that would have fallen under that instrument must now comply with the 2023 Determination. The repeal is not retrospective; corrections that were properly made under the 2013 Determination before its repeal remain valid. The 2023 Determination does not state that it is a remaking, but the repeal of the earlier instrument indicates a fresh policy approach. The 2013 Determination itself may have had a different structure and different value limits; the 2023 version introduces a new turnover bracket for entities with current GST turnover of less than $20 million, giving them an 18-month time limit and a $12,500 value limit, whereas the 2013 version may have had a lower threshold. The 2023 Determination also adds a specific note in the definition of error referencing subsections 29-10(4) and 142-10 of the GST Act, clarifying that no error exists in circumstances where those provisions apply. This note was not present in the 2013 Determination. The 2023 Determination also includes an updated table for debit error time limits and value limits, with five turnover tiers (previously there may have been fewer tiers). The authority for the instrument remains the same (subsection 17-20(1) of the GST Act). The maker is the Deputy Commissioner of Taxation, Mr Ben Kelly. There is no indication in the source that the 2023 Determination has been subject to any disallowance, judicial review or amendment since its registration. The legislative history is limited to this single replacement. Practitioners should refer to the Explanatory Statement that would have accompanied the determination for further policy background, but the source text does not include that statement.

The source text for this determination does not reference any litigation. The instrument itself is a legislative rule and has not been the subject of judicial consideration in the text provided. It is possible that the predecessor instrument (the 2013 Determination) was considered in litigation, but the source does not name any cases. Similarly, the general error correction power under section 17-20 of the GST Act may have been interpreted in GST cases, but the determination does not cite any. Therefore, a discussion of litigation history must be limited to what is apparent from the instrument on its face. The conditions in the determination - particularly the meaning of recklessness as to the operation of a GST law or intentional disregard of a GST law in section 7(a) - have obvious analogues in penalties litigation, where the TAA uses similar language. The definition of compliance activity may also interact with case law on what constitutes an audit or review. However, there is no case law mentioned in the determination. The note to section 4 defining compliance activity states that it includes examinations related to reviews, audits, verification checks, record-keeping reviews or audits, and other similar activities. This expansive definition may reduce litigation because it covers a wide range of ATO behaviours. The exclusion of errors where subsections 29-10(4) or 142-10 apply reflects legislative responses to earlier interpretive uncertainties under the GST Act, but again no case is cited. The determination’s silence on litigation means that any analysis of court interpretations would rely on external sources and would not be grounded in this document. Accordingly, the only safe statement is that the determination itself does not mention any litigation, and that the proper construction of its terms is subject to the usual principles of statutory interpretation applied by courts and tribunals. The ATO may have issued guidance or rulings on how it will apply the determination, but such materials are not part of the source document.

Several aspects of the determination may trap unsuspecting taxpayers. First, the net sum of the debit errors condition in section 7(c) is not simply the total of each debit error amount. You must deduct any credit error amounts you are also correcting in the same tax period. If you have both debit and credit errors from earlier periods, the net sum must be below the value limit, not the debit errors alone. This means a large debit error might be permissible if you also discover an even larger credit error in the same later return, bringing the net sum under the threshold. Conversely, a small debit error that would otherwise be within the limit could become impermissible if you also correct a credit error that is not large enough to offset it sufficiently (because the net sum is debit minus credit, so a small credit reduces the net sum, but if the credit is very small, the net sum remains high). Second, the debit error time limit is measured from the due date of the GST return for the period in which the error was made, not from the date the error was actually committed or discovered. For monthly lodgers, the due date is typically 21 days after the end of the tax period; for quarterly lodgers, it is 28 days after the quarter. The 18-month limit for small entities runs from that due date, not from the error occurrence. Third, the condition in section 6(c) requires the later period return to be lodged within the period of review for the earlier period. The period of review is generally four years from the date of the original assessment (the date the return is lodged, if the return is treated as an assessment). If the earlier period’s period of review has expired, you cannot use the correction pathway at all, even if you are within the debit error time limit. The debit error time limit is shorter than the period of review for most entities, but credit errors do not have a specific time limit (only the period of review condition). Fourth, the prohibition on correcting an error that relates to a matter that has been notified as subject to a compliance activity (section 6(d)(i)) applies even if the compliance activity has not yet concluded. The definition in section 4 says the compliance activity ends when the Commissioner gives a notice of assessment or amended assessment, or advises you the examination is finalised. Until that happens, the error cannot be corrected unless the Commissioner gives written permission. This can trap entities that receive an audit notification but continue to self-correct errors in later returns while the audit is pending. Fifth, the exclusion of errors involving Division 93 of the GST Act (cessation of input tax credit entitlement) means that if you previously claimed an input tax credit and your entitlement later ceases (for example, due to a change in use), the reversal of that credit is not an error for the purposes of the instrument and must be handled through the adjustment provisions in Division 93. Sixth, the determination does not allow correction of errors by amending a later period assessment (section 8). If you have already lodged a later period return and it has been assessed, you cannot request an amendment of that later assessment to include the error correction. You must instead amend the earlier period’s assessment. Seventh, the debit error correction is unavailable if the error resulted from recklessness or intentional disregard. This is a subjective test; an entity that made a genuine mistake but with a degree of carelessness may still be considered reckless. The Commissioner may later form that view, invalidating the correction and possibly imposing penalties. Eighth, the determination applies only to errors relating to amounts of GST, input tax credits or adjustments under the GST Act. Errors in classification of supplies or in applying special schemes may still be covered if they affect a net amount, but errors purely about administrative matters (such as incorrect reporting of GST-free supplies that do not affect net amount) may not be correctable under this instrument.

Compliance with the determination involves a structured process to ensure all conditions are met before including a correction in a later period GST return. Step one is to identify the error and determine whether it is a credit error or a debit error, and to calculate the exact amount. Step two is to check whether the error is excluded: if it relates to an input tax credit where entitlement has ceased under Division 93 of the GST Act, or if it involves an amount the Commissioner need not refund under section 105-65 of Schedule 1 to the TAA, the error cannot be corrected under this instrument. Step three is to verify that the earlier tax period started on or after 1 July 2012. If the error is in a period before that date, the ordinary amendment process must be used. Step four is to confirm that the error has not been previously corrected, to any extent, in an earlier return. If it has, you cannot correct it again. Step five is to check whether any compliance activity is underway. You must review any written notifications from the Commissioner about examinations of your GST affairs. If a compliance activity is in progress for the earlier period or for the matter to which the error relates, you cannot correct unless the Commissioner has given written permission. It is prudent to maintain a central register of ATO compliance activity notifications. Step six for debit errors is to assess your own conduct. Determine whether the error was the result of recklessness or intentional disregard of a GST law. This may require a review of your internal processes, training, and the knowledge of the officers who made the mistake. If there is any risk that the error might be characterised as reckless, seek professional advice; it may be safer not to use the determination and instead lodge an amendment for the earlier period. Step seven is to calculate your current GST turnover for the period in which you intend to lodge the correction return. Use the standard turnover test in the GST Act, noting that if you are in a GST group, you must aggregate the supplies of all group members. Determine which turnover bracket you fall into and identify the corresponding debit error time limit and debit error value limit from the table in section 7. For entities with turnover under $20 million, the time limit is 18 months after the due date of the return for the period in which the error was made; for all other brackets, it is 12 months. You must now calculate the net sum of the debit errors you wish to correct. This is the sum of all debit error amounts less the sum of any credit error amounts you are also correcting in that same return. Ensure the net sum is less than the applicable value limit. Step eight is to confirm that the later period return will be lodged within the period of review for the earlier period. The period of review is generally four years from the date of the original assessment; for most entities this is satisfied easily, but it is worth checking for very old errors. Step nine is to include the correction in the net amount of the later period return. The correction is not shown as a separate line item on the return - you simply adjust the net amount to reflect the correction. However, you must keep detailed records of the error, including the original calculation, the corrected amounts, and the basis for concluding that the conditions are met. The ATO may later request evidence of the correction. Step ten is to monitor your compliance activity status even after lodgment, because if the Commissioner later determines that a condition was not satisfied (for example, that the error was reckless), you may face a shortfall assessment and penalties. The safest approach is to document your reasoning contemporaneously, including the absence of any compliance activity notification and the method used to calculate current GST turnover and the net sum. The determination does not require a separate application form; compliance is achieved through the act of lodging the return.