Credit Note Generator

When to issue a credit note in Australia

A credit note is a formal document issued by a supplier to reduce the amount owed by a customer. Common reasons include returned goods, pricing errors, overcharges, damaged goods, or services that were not delivered. In Australia, credit notes are typically issued to offset or cancel a previously issued invoice, and must clearly reference the original invoice number and the reason for the credit.

Under ATO rules, if the original sale included GST and the credit note value is $82.50 or more (including GST), the credit note must meet the requirements of an adjustment note — the GST equivalent of a credit note. An adjustment note must include your business name and ABN, the date, the original invoice reference, and the amount of the GST adjustment. Buyers who are registered for GST can only claim input tax credits for the adjusted amount once they hold a valid adjustment note.

A credit note is not the same as a refund. A credit note reduces what the customer owes (or creates a credit balance for future invoices), while a refund is an actual transfer of money back to the customer. Both may be appropriate depending on the situation, and in some cases both are needed — for example, issuing a credit note and then processing a bank transfer.

When recording a credit note in Xero, use the "Credit Notes" function under Accounts Receivable (if you issued the original invoice) or Accounts Payable (if you received a credit from a supplier). Xero will automatically reduce the outstanding balance and allow you to allocate the credit against a future invoice. In MYOB, the equivalent is a "Return and Credits" transaction linked to the original sale or purchase. Always confirm specific requirements with your accountant or tax adviser.

How to use this credit note generator

1. Enter your business name and ABN, and the customer's details. Add a credit note number and today's date.
2. Reference the original invoice number and select the reason for the credit (e.g. returned goods, overcharge, price adjustment).
3. Add the line items being credited with quantities and amounts. GST is calculated automatically.
4. Download the PDF and send to your customer. If this is an adjustment note under ATO rules, file a copy for your records for at least five years.

Does a credit note need to show GST?

Yes, if the original invoice included GST. The credit note (adjustment note) must clearly show the amount of GST being reduced. Your customer needs this to adjust their GST input tax credit claim, and you need it to reduce your GST liability on your BAS. If no GST was charged on the original sale, the credit note should indicate that no GST applies.

Can I issue a credit note for a partial amount?

Yes. Credit notes do not need to be for the full invoice value. A partial credit is common when only some goods are returned or a pricing discount is applied after the invoice was issued. The credit note should clearly identify which line items or amounts are being credited to avoid confusion.

What is the difference between a credit note and a refund?

A credit note adjusts the amount owed on paper — it does not involve an actual cash transfer. A refund is the physical return of money to the customer. If a customer has already paid the full invoice and goods are returned, you would typically issue both a credit note (to satisfy ATO adjustment note requirements) and a bank transfer or payment back to the customer.