Time Machine says not enough space but there is plenty of space

I'm not sure what happened but I used to be able to backup to a drive shared with a networked Mac Mini using OSX server. Now all of a sudden it says there is not enough space.

So I reformatted the drive (12TB) and restarted the whole thing. However Time Machine now tell me there is not enough space. It says:

The backup disk needs 5.35 TB for the backup but only 499.49 GB are available.

I'm not sure why only 499GB is available.

I've run into this before when using networked backup, also said something like 497GiB were free when actually 4TiB were free. Seems this is caused by TM not creating a large enough sparsebundle for the initial backup. I found a workaround that at least worked for me (El Capitan) and submitted a bug report to Apple.

Workaround: You should notice that the sparsebundle on the OS X server has only ~499GiB as its capacity. Manually enlarge it by running this command on the server: sudo hdiutil resize -size [number of gigabytes]g [path to sparsebundle], e.g. sudo hdiutil resize -size 10000g /Volumes/Backups/mybackup.sparsebundle. Make it as large as you need. Retry your backup.

Edit: You may also have to resize the sparsebundle's partition in Disk Utility. I didn't have to do this, but maybe that's because my backup wasn't encrypted. For instructions, see the first (not accepted) answer here: Increase size of sparsebundle for TimeMachine

It sounds like you may not have the correct drive selected for the Time Machine backup. Can you try temporarily turning off Time Machine in the System Preferences and then choose Select Backup Disk on the right and choose the 12TB disk. This will verify you're attempting to use the correct disk.

Alternately you may need to check that the new disk is formatted correctly using the steps at the beginning of this doc:

https://support.apple.com/en-us/HT202380