If you account for goods and services tax (GST) on a non-cash (accruals) basis, you can claim a decreasing adjustment for a bad debt if:
- you made a taxable sale and have paid GST to the ATO for that sale
- you have not received the consideration, either in whole or in part, for the taxable sale, and
- you write the debt off as bad or the debt has been overdue for 12 months or more.
The ways to demonstrate that a debt is bad for income tax purposes also apply to when a debt is considered bad for GST purposes. Similar to income tax, you cannot write off a debt as bad if you have forgiven the debt or set it off against other liabilities.
You can make the decreasing adjustment for the tax period in which you:
- write off the debt, or
- become aware that the debt was overdue for 12 months or more.
If you claim a decreasing adjustment after writing off a debt as bad or where a debt was overdue for 12 months or more, and subsequently recover some or all of that debt, you will have an increasing adjustment in the tax period in which you recover the debt.
See also:
- GSTR 2000/2 Goods and services tax: adjustments for bad debts
- Types of adjustments
Source: ATO
