diff --git a/app/controllers/spree/admin/adjustments_controller_decorator.rb b/app/controllers/spree/admin/adjustments_controller_decorator.rb
new file mode 100644
index 0000000000..23cce4a623
--- /dev/null
+++ b/app/controllers/spree/admin/adjustments_controller_decorator.rb
@@ -0,0 +1,17 @@
+module Spree
+  module Admin
+    AdjustmentsController.class_eval do
+      before_filter :set_included_tax, only: :create
+
+      private
+
+      def set_included_tax
+        if params[:tax_rate_id].present?
+          tax_rate = TaxRate.find params[:tax_rate_id]
+          amount = params[:adjustment][:amount].to_f
+          params[:adjustment][:included_tax] = tax_rate.compute_tax amount
+        end
+      end
+    end
+  end
+end
diff --git a/spec/controllers/spree/admin/adjustments_controller_spec.rb b/spec/controllers/spree/admin/adjustments_controller_spec.rb
new file mode 100644
index 0000000000..bc0b4644ff
--- /dev/null
+++ b/spec/controllers/spree/admin/adjustments_controller_spec.rb
@@ -0,0 +1,34 @@
+require 'spec_helper'
+
+module Spree
+  describe Admin::AdjustmentsController do
+    include AuthenticationWorkflow
+
+    before { login_as_admin }
+
+    describe "setting included tax when creating an adjustment" do
+      let(:order) { create(:order) }
+      let(:tax_rate) { create(:tax_rate, amount: 0.1, calculator: Spree::Calculator::DefaultTax.new) }
+
+      it "sets included tax to zero when no tax rate is specified" do
+        spree_put :create, {order_id: order.number, adjustment: {label: 'Testing included tax', amount: '110'}, tax_rate_id: ''}
+        response.should redirect_to spree.admin_order_adjustments_path(order)
+
+        a = Adjustment.last
+        a.label.should == 'Testing included tax'
+        a.amount.should == 110
+        a.included_tax.should == 0
+      end
+
+      it "calculates included tax when a tax rate is provided" do
+        spree_put :create, {order_id: order.number, adjustment: {label: 'Testing included tax', amount: '110'}, tax_rate_id: tax_rate.id.to_s}
+        response.should redirect_to spree.admin_order_adjustments_path(order)
+
+        a = Adjustment.last
+        a.label.should == 'Testing included tax'
+        a.amount.should == 110
+        a.included_tax.should == 10
+      end
+    end
+  end
+end
diff --git a/spec/features/admin/orders_spec.rb b/spec/features/admin/orders_spec.rb
index 4a30c3a60c..2a3464abf9 100644
--- a/spec/features/admin/orders_spec.rb
+++ b/spec/features/admin/orders_spec.rb
@@ -106,6 +106,30 @@ feature %q{
     current_path.should == spree.admin_orders_path
   end
 
+  scenario "adding taxed adjustments to an order" do
+    # Given a tax rate
+    create(:tax_rate, name: 'GST', calculator: build(:calculator, preferred_amount: 10))
+
+    # When I go to the adjustments page for the order
+    login_to_admin_section
+    visit spree.admin_orders_path
+    page.find('td.actions a.icon-edit').click
+    click_link 'Adjustments'
+
+    # And I create a new adjustment with tax
+    click_link 'New Adjustment'
+    fill_in 'adjustment_amount', with: 110
+    fill_in 'adjustment_label', with: 'Late fee'
+    select 'GST', from: 'tax_rate_id'
+    click_button 'Continue'
+
+    # Then I should see the adjustment, with the correct tax
+    page.should have_selector 'td.label', text: 'Late fee'
+    page.should have_selector 'td.amount', text: '110'
+    page.should have_selector 'td.included-tax', text: '10'
+  end
+
+
   context "as an enterprise manager" do
     let(:coordinator1) { create(:distributor_enterprise) }
     let(:coordinator2) { create(:distributor_enterprise) }