Who can claim
This deduction is available to individuals and companies.
- The debt has been included in assessable income or satisfies the relevant money-lending rule.
- The debt is genuinely bad and is written off during the income year.
What you cannot claim
- A provision, estimate or doubtful-debt allowance is not the same as a debt written off.
- Continuity, ownership and business tests can affect company deductions.
How the amount is worked out
Claim the qualifying debt written off, after checking entity-specific loss and continuity rules.
Records the ATO expects
- Debtor ledger
- Recovery history
- Write-off approval
Before you rely on this rule
Company continuity and ownership rules can affect bad-debt deductions. Review the current ATO business instructions before claiming.
Where this rule comes from
Primary source: Income Tax Assessment Act 1997 section 25-35 (Section 25-35 bad debts). Reviewed 30 July 2026. Covers the 2025-26 and 2026-27 income years.
Supporting sources:
- Income Tax Assessment Act 1997 section 165-120 (Section 165-120 company bad-debt continuity)