Why You Should Write Off Bad Debts

As a business owner, rather than carrying the accounts receivable balance every year, we recommend writing off those invoices as a bad debt expense so that the business can claim it as an expense. If you've written it off in the 2022 Financial Year, but in 2023, that client has now come back and paid you, that's considerable. We can just recreate the invoice and make it as an income in the 2023 financial year.

Go through your accounts receivables and write them off. When you do, it also depends on how you lodge your BAS whether through a cash basis or an accrual basis. If you're lodging your BAS on an accruals basis, as soon as you raise the invoice you're paying the GST to the ATO. This is regardless if you have been paid or if that invoice has been paid or not. So, if you write it off as a bad debt, then you get the GST back. If you are doing it on a cash basis, then you haven't paid that GST yet because you haven't physically received it. There will be no GST adjustment in the past for it. Writing off bad debts not only helps you with your GST back from the ATO, but it will also be a deductible expense in the business.

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Welcome to Inspire Accountants. We are dedicated to helping small business owners in Brisbane and around Australia to save tax, boost their profits, and accelerate cash flow.

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If you’re a business owner, you know that having a great accountant is essential to your success. But finding the right one can be a challenge.

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