Bad debt write-off
An accounting entry removing a debt judged unlikely to be recovered from your active receivables.
What it means
A bad debt write-off is the accounting step of removing a specific debt from your receivables once you decide it is no longer realistically collectable. It recognises the loss in your books so your accounts reflect what you genuinely expect to receive.
Importantly, writing a debt off is an accounting decision — it does not, by itself, cancel the customer's legal obligation to pay. The debt may still be pursued, or in some cases sold.
Tax treatment
There are rules about when a debt can be written off and how it is treated for income tax and GST. The position depends on your circumstances and accounting method, so check with the ATO or your accountant before claiming a deduction. See also doubtful debt provision, which estimates likely losses before any single debt is written off.
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