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How do I write off a bad debt and claim back GST in Australia?

Short answer

If a debt is genuinely bad and was previously included in your assessable income, you may be able to claim a deduction once you write it off in writing in that income year. If you account for GST on a non-cash (accruals) basis, you may claim a decreasing GST adjustment when you write the debt off or once it has been overdue for 12 months or more. Talk to your accountant.

General information only, not legal or financial advice. Every business and every debt is different. For advice on your situation, talk to a lawyer, your accountant or your state small business commissioner.

Step by step

  1. 1

    Decide whether the debt is genuinely bad

    You have taken reasonable steps and do not expect to recover it.

  2. 2

    Write it off in writing

    Before the end of the income year you claim it.

  3. 3

    Check your GST accounting basis

    Adjustments generally apply to non-cash basis accounting.

  4. 4

    Report the GST adjustment on your BAS

    In the period you write it off or it reaches 12 months overdue.

  5. 5

    If you later recover money, adjust back

    An increasing adjustment applies.

What else to know

The ATO notes you cannot write off a debt as bad if you have forgiven it or set it off against other amounts. Companies have extra tests.

Writing off a debt for tax does not stop you recovering it later if the customer's situation changes.

ATO resources in the directory

Common questions

Can I claim a bad debt if I use cash accounting?

Generally no deduction is available for income never brought to account. Check with your accountant.

Do I have to wait 12 months for the GST adjustment?

No. You can adjust when you write the debt off as bad, or once it has been overdue for 12 months, whichever comes first.

Official sources

Sources checked 14 October 2026. Rules and limits change, so check the official site before acting.

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