A deduction, not a refund
A write-off returns only the tax on the amount — you're still out of pocket for the rest.
Tax
Is a bad debt tax deductible in Australia?
Writing off a bad debt may give you a deduction — but it softens the loss, it doesn't erase it. Here's the general position, and why recovery is usually the better first move.
In general terms, a business can claim a deduction for a debt it writes off as bad, provided the amount was previously brought to account as assessable income (broadly, the position for businesses on an accruals basis) and the debt is genuinely bad and physically written off in the accounts before year end. The rules have conditions and exceptions, and GST adjustments can also apply, so the treatment of a specific debt should be confirmed with your accountant or registered tax agent.
The important point is that a deduction is not the same as being made whole. At a 25–30% company tax rate, writing off a $10,000 debt returns roughly $2,500–$3,000 in tax — you are still thousands of dollars worse off. Because Merion works on a no-recovery-no-commission basis, attempting recovery costs nothing upfront, and anything recovered beats the partial relief of a write-off. This is general information, not tax or financial advice. You can model the difference with our write-off vs recover calculator, or refer the account.
The real numbers
A deduction softens the loss
Conditions apply
Broadly the debt must have been assessable income, genuinely bad, and written off before year end.
Recovery usually wins
Anything recovered beats the partial relief of a write-off.
No recovery, no fee
Trying to recover costs nothing upfront on commission-only terms.
Before you write it off
Refer the account first — recovery on commission costs nothing to attempt.
Common questions
Frequently asked questions
Can I claim a bad debt as a tax deduction?
Generally a business can, if the amount was previously assessable income, the debt is genuinely bad, and it's physically written off before year end. Conditions and GST adjustments apply — confirm with your accountant.
Does writing it off make me whole?
No. A deduction only returns the tax on the amount — at a 25–30% company rate, you're still left thousands of dollars short on a large debt.
Should I write off or recover?
Recovery is usually the better first move, because anything recovered beats partial tax relief, and on commission-only terms it costs nothing upfront to try.
Is this tax advice?
No — this is general information only. For advice on a specific debt, consult your accountant or registered tax agent.
Get started
Thinking of writing it off?
Refer the account for a free appraisal first.