How to Issue a Credit Note
Create a separate document that references the original invoice, states the amount being credited and why, and adjusts GST if the sale included it.
In this answer
- Build a credit note that links to the original invoice
- Include the right details and reason
- Handle GST correctly where it applies
- Find out where to confirm the rules
4 min
Start from the original
Issuing a credit note begins with the invoice you are correcting. Do not amend that invoice — instead create a separate document that clearly references it. Capture the original invoice number and date so the two can be matched, then state how much you are crediting. Whether you are reversing the whole invoice or just part of it, being explicit about the amount avoids any doubt at the customer's end.
Keeping the credit note separate preserves the integrity of your records: the original sale stands as it was, and the correction sits alongside it. That is exactly what a reviewer — or your future self at tax time — wants to see when reconciling the account.
Include the right details
A useful credit note generally shows: your business name and ABN, the date, a clear reference to the original invoice, a short reason for the credit (return, over-charge, agreed discount), a description of what is being credited, and the amount. Treat it with the same care as an invoice — it is a real financial record, not a quick note.
The reason matters more than people expect. Months later, 'credit $X against invoice 123' with no explanation invites questions. A one-line reason makes the document self-explanatory and speeds up reconciliation for both sides.
Get the GST right
If the original sale included GST, your correcting document usually needs to function as an adjustment note, because reducing the sale also reduces the GST you accounted for. The ATO sets out what such a document should contain and when it applies. Do not just subtract a round figure and ignore the GST component — the GST needs to be adjusted correctly so your activity statement reflects reality. If GST is involved, confirm the adjustment-note requirements with the ATO or your accountant before issuing.
Produce and file it
You can lay out a clean credit note with our free invoice tools, then store it with the original invoice. For background, see what a credit note is.
This is general information only, not tax or legal advice. Credit note and adjustment-note requirements depend on your circumstances — confirm them with the ATO or your accountant.
Key takeaways
- Create a separate document, not an edit of the original invoice.
- Reference the original invoice number and date.
- State the amount credited and a clear reason.
- Adjust GST correctly where the original sale included it.
- Confirm adjustment-note requirements with the ATO or your accountant.
Frequently asked questions
Do I need to reference the original invoice?
Yes. A credit note should clearly link to the invoice it corrects, by number and date, so the two reconcile.
Can I credit just part of an invoice?
Yes. A credit note can reverse the whole invoice or only part of it — just state the amount clearly.
What about the GST on the credited amount?
If the sale included GST, the correcting document usually needs to work as an adjustment note. Confirm the requirements with the ATO or your accountant.
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