Before you can claim a deduction for writing off a bad debt, the debt must actually be written off. This means that if you wanted to claim a bad debt deduction in the income year ended 31 March 2020, you would need to have written the debt off as bad by 31 March 2020.
Because of the COVID-19 pandemic, the time for writing off bad debts for the 2020 income year has been extended to 30 June 2020. However, while the time frame has been extended, you:
- cannot write off the debts as bad by the end of the 2020 income year as a result of the impacts of Covid-19
- can only take into account information that was relevant as at the end of your 2020 income year.
The Commissioner’s variation decision, COV 20/04, approving this extension can be found in the link below.