Can I claim a deduction for bad debts in Australia?

If a client hasn't paid your invoice and you've given up hope of collecting it, you may be able to claim a deduction for a 'bad debt'. Conditions to claim: 1. The income must have been previously 'included' in your taxable income (this means you must be using the **accruals** method of accounting, not the cash method). 2. There must be a debt still owing to you. 3. The debt must be truly 'bad' (you have tried to collect it and there is no reasonable expectation of payment). 4. You must write off the debt in your records before June 30. If you use the **cash method** of accounting, you only report income when you actually receive it, so you never 'include' the unpaid invoice in your income and thus cannot claim a bad debt deduction.

• Only for accrual-basis taxpayers
• Debt must be written off in records by June 30
• Must have made reasonable attempts to collect
• Cash-basis traders don't need this (income isn't reported until paid)
• Keep records of collection attempts