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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.

COV 20/04 Variation in relation to s DB 31 Income Tax Act 2007 to extend time for writing off bad debt