Credit Note Template
When you need to reduce or reverse an invoice, do it properly. A credit note keeps your ledger and the customer's GST credits correct.
What's included
- Reverse or reduce an invoice without deleting it
- Reference the original invoice the credit applies to
- Handle the GST adjustment on a credit correctly
- Decide between a refund and an account credit
- Keep credit notes numbered and traceable
6 min read
Why this template matters
Mistakes and returns happen — an overcharge, a short delivery, a cancelled line. The wrong fix is to delete or quietly edit the original invoice, because that breaks your numbering, your audit trail and the customer's ability to reconcile. The right fix is a credit note: a separate, numbered document that reduces or reverses the original while leaving it intact.
A credit note keeps both ledgers honest. It shows exactly which invoice is being adjusted and by how much, so the customer can correct their own records and their GST position stays right. Done properly, it turns a potentially messy correction into a clean, traceable transaction.
The template
CREDIT NOTE [Your trading name] ABN: [11 22 333 444] To: [Customer name] Credit note number: CR-0009 Date: 18 March 2026 Against invoice: INV-0117 (dated 05 Mar 2026) Reason: Short delivery — 2 units not supplied ------------------------------------------------------------ Description Amount (AUD) ------------------------------------------------------------ Credit — 2 units @ 90.91 (ex GST) -181.82 ------------------------------------------------------------ Subtotal credited (ex GST) -181.82 GST adjustment (10%) -18.18 TOTAL CREDIT (inc GST) -200.00 ------------------------------------------------------------ This credit reduces invoice INV-0117 to $2,000.00 inc GST. [ ] Applied to account [ ] Refunded by EFT
How to use it
Give the credit note its own number (a CR- prefix keeps it distinct from invoices) and always reference the original invoice and a brief reason. State plainly what the original invoice now reduces to, so there is no ambiguity about the new amount owing. Then keep the original invoice exactly as it was — the credit note is what does the adjusting.
Decide and mark whether the credit is applied to the account (reducing a future or current balance) or refunded (money paid back). For an ongoing customer, applying it to the account is usually simplest and will flow through to the next statement of account. Reflect the credit on the next statement so the running balance always reconciles.
Getting the GST adjustment right
If the original invoice carried GST, the credit note must reverse the proportional GST too — you are effectively unwinding part of a taxable supply, so the GST comes off with it. This template shows the credit and its GST adjustment as negative amounts. For your activity statement, the credit typically adjusts the GST you reported on the original supply.
Adjustments can have timing and threshold rules, so this is general business information rather than tax advice. For anything beyond a straightforward reduction — bad-debt write-offs, or adjustments spanning reporting periods — confirm the correct treatment with the ATO or your accountant before lodging.
Tips
- Never edit or delete the original invoice — issue a credit note instead.
- Reference the original invoice number and state the reason.
- Reverse the proportional GST when the original invoice carried it.
- Mark clearly whether the credit is refunded or applied to the account.
FAQ
Why not just cancel the original invoice?
Deleting or editing an issued invoice breaks your numbering and audit trail and confuses the customer's records. A credit note adjusts the invoice while leaving it intact and traceable.
Does a credit note reverse GST?
If the original invoice included GST, the credit reverses the proportional GST too, and you adjust it on your activity statement. Confirm timing and edge cases with the ATO or your accountant.
Refund or account credit?
For an ongoing customer, applying the credit to their account is usually simplest and flows through to the next statement. A refund returns the money. Mark clearly which one applies.
Templates are a head start — not legal advice
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