What Is a Credit Note? (NZ GST Rules Explained)
A credit note is a document a supplier issues to reduce or cancel an invoice that has already been sent, for example after returned goods, a short delivery or a pricing mistake. The customer then owes less, or gets a refund or credit on their account. Since 1 April 2023, NZ GST law calls the required details "supply correction information", but most businesses still call the document a credit note.
When You Issue a Credit Note
- Goods are returned or arrive damaged
- A delivery is short against what was invoiced
- The price or quantity on the invoice was wrong
- A discount or rebate is agreed after invoicing
- An invoice was raised twice or to the wrong customer
Don't just edit or delete the original invoice once it's been sent. The credit note keeps a clear record of what changed and why, which matters for GST and for any dispute later.
Credit Notes and NZ GST
Before April 2023, GST-registered suppliers had to issue a document called a credit note. Under the current rules, the requirement is to provide supply correction information: the details needed to show how the original supply changed. As with taxable supply information on invoices, the label doesn't matter. You can keep calling it a credit note.
Supply correction information generally needs to identify you and your GST number, the customer (where their details were needed on the original invoice), the date, a description of the change, and the amount of the correction and the GST on it. If a GST-registered customer asks for it, it must be provided within 28 days, or by a date you both agree. The supplier then reduces the GST it pays in the return for the period the correction is made, and the customer reduces the GST it claimed.
Worked Example With the GST Maths
A Nelson commercial furniture supplier invoices a school $23,000 including GST for 40 desks. Four arrive damaged and are returned.
| Excl. GST | GST (15%) | Incl. GST | |
|---|---|---|---|
| Original invoice (40 desks) | $20,000.00 | $3,000.00 | $23,000.00 |
| Credit note (4 desks) | −$2,000.00 | −$300.00 | −$2,300.00 |
| Now owing | $18,000.00 | $2,700.00 | $20,700.00 |
The supplier claims back $300 of output GST in its next return. The school reduces its input tax claim by the same $300. If the school had already paid the full $23,000, the $2,300 either comes back as a refund or sits as a credit against its next order.
Credit Note vs Refund vs Debit Note
| Document | What it does |
|---|---|
| Credit note | Reduces what the customer owes on an invoice |
| Refund | Money actually paid back, often after a credit note when the invoice was already paid |
| Debit note | Increases what the customer owes, for example an under-charged invoice |
When the customer pays the reduced amount, their remittance advice should list the credit note so your accounts team can match the payment.
This is a plain-English summary of Inland Revenue's published rules, not tax advice. For your own situation, check ird.govt.nz or talk to your accountant.
Frequently Asked Questions
Do I still need to issue credit notes in NZ after the 2023 GST changes?
You need to provide supply correction information when a GST registered customer asks for it. In practice almost every business does that by issuing a credit note, and you can keep using that name.
Does a credit note need to show GST?
If you're GST registered, yes. Show the amount of the correction and the GST on it, so both you and the customer can adjust your GST returns correctly.
Can I just cancel or void the invoice instead?
Only if it hasn't been sent or included in a GST return yet. Once a customer has it, issue a credit note so there's a record of the change.
How do I create a credit note in Xero?
Open the original invoice, choose the option to add a credit note, adjust the lines and amounts, then approve it and allocate it to the invoice or leave it as a credit on the customer's account.
Is a credit note the same as a refund?
No. A credit note reduces what's owed. A refund is money actually paid back, which usually only happens when the customer had already paid the original invoice in full.
