Tax tip of the month: Writing off bad debts before year-end
As we approach the end of the financial year, now is a good time to review your accounts receivable and consider whether any outstanding debts are unlikely to be recovered. If so, you may be able to claim a tax deduction for those bad debts.
To be eligible for a deduction, you must:
- Have previously included the amount in your assessable income (i.e. invoiced the customer and recorded a sale)
- You need to be sure the debt is genuinely unrecoverable when you write it off. It’s not enough for the debt to just be overdue or uncertain—you must reasonably believe there’s no chance of getting paid.
- The debt must be formally written off in your books before 30 June.
- Document your efforts to recover the debt (e.g. Emails, letters, overdue notices, phone calls and or formal demands)
Call to action before 30 June 2025
- Review your aged receivables and follow up any long-overdue debt.
- Ensure you inform your bookkeeper and accountants of any bad debts that need to be written off
- Keep a detail record showing your efforts to recover the debt (you may need it for auditing purposes.
If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute teams or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
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