Reviewing your accounts receivable / debtor’s ledger, i.e., people that owe you money and writing off any amounts that you won't be able to collect is an effective tax planning tool. 

Provided you are assessed on an accruals basis for income tax purposes, writing off bad debts will reduce your taxable income.  The same will also be true for GST.

Please note that you can only claim a deduction for bad debts if the debt is:

1.    Written off as bad before the end of the financial year; and

2.    Has previously been included in your assessable income.

As you must maintain written records as proof that debts have been written off as bad before year end of the financial year,  many entities prepare a minute / resolution detailing the bad debts to meet this obligation.

If you would like to discuss further please contact us:
McNamara and Co - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandcompany.com.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.com

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