Incorrect GST Charged: How to Fix BAS Errors and Stay Compliant

Charging GST incorrectly is a common mistake many businesses make, especially when dealing with complex transactions. However, if not handled properly, it can lead to compliance issues and financial loss.

Understanding how to fix GST errors is essential to staying compliant with the Australian Taxation Office and protecting your business.

In this guide, TitanTax explains what happens when GST is charged incorrectly and the steps you should take to resolve it.

What is Excess GST?

Excess GST occurs when you incorrectly treat a transaction as taxable and report more GST than required in your Business Activity Statement (BAS).

This can happen when you:
Treat a non-sale as a taxable sale
Treat a GST-free or input-taxed sale as taxable
Miscalculate your GST liability
Report a higher GST amount in your BAS

Even small mistakes in GST reporting can have significant consequences if not corrected properly.

What Happens If You Charge Too Much GST?

If you charge your customer more GST than required and include it in the price:

The ATO generally considers that GST has been passed on to the customer
If you have not refunded the excess to the customer, the ATO treats it as correctly payable
This means you may not be eligible for a refund from the ATO

When is GST Considered “Passed On”?

The ATO considers GST to be passed on if:

The sale is treated as taxable
A tax invoice is issued showing GST
GST is included in the price (even if not separately stated)

In most cases, this means the excess GST cannot be recovered unless you take further action.

What If GST Was Not Passed On?

In rare situations, if you can prove that GST was not passed on to the customer, the excess amount may be treated as a GST error.

In this case:

You can correct the mistake in a future BAS
Supporting evidence is required to justify the correction

Reimbursing Customers for Excess GST

If you have passed on excess GST, the key step is to reimburse your customer.

Once reimbursed:

You can make a decreasing adjustment in your BAS
This allows you to recover the excess GST previously paid

Important points:

The adjustment must be made in the BAS period when the reimbursement occurs
If you do not reimburse the customer, you generally cannot recover the excess GST
In some cases, you may apply to the ATO for a refund, but approval is not guaranteed

What Happens If Your Customer is GST-Registered?

If your customer is registered for GST and has claimed an input tax credit:

They must make an increasing adjustment
This adjustment equals the reimbursed GST amount
It must be reported in their BAS for the relevant period

Can You Charge an Administration Fee?

Yes, businesses may charge an administration fee when processing GST reimbursements.

However:

The fee must reflect reasonable administrative costs
The customer must agree to the fee

If these conditions are not met:

You may not be eligible for a full GST refund
You can only recover the amount actually reimbursed

Key Steps to Fix Incorrectly Charged GST

To resolve GST errors effectively:

Identify the mistake and affected transactions
Determine whether GST was passed on
Decide whether to reimburse the customer
Process reimbursement (if applicable)
Make the correct BAS adjustment
Maintain proper documentation

How to Avoid GST Mistakes

Preventing errors is always better than fixing them later.

Best practices include:

Regularly reviewing GST classifications
Using reliable accounting software
Keeping accurate and detailed records
Staying updated with ATO guidelines
Working with experienced tax professionals

Final Thoughts

Incorrectly charging GST can be costly if not handled correctly. Whether you can recover excess GST depends on:

How the transaction was treated
Whether GST was passed on
Whether the customer is reimbursed

Understanding these rules ensures you remain compliant and avoid unnecessary financial loss.

Get Expert GST Support with TitanTax

At TitanTax, we help businesses:

Review GST transactions and identify errors
Correct BAS reporting issues
Manage ATO compliance requirements
Reduce risk and improve financial accuracy

👉 Contact TitanTax today to ensure your GST is handled correctly and confidently.