Bad debts

We focus on deductions claimed for bad debts, in particular:

• the genuine nature of bad debts
• whether it is correct to treat the debt as bad
• arm's length treatment of debts within closely held groups
• the treatment, by related entities, of income reflecting the debt
• the documentation and evidence supporting the claims.

We also look at the correct application of the deduction rules, in particular:

• the period when the debts were written off
• the amount being claimed
• whether there is a lending business or the debt is included in income
• the rules being used for individuals, companies and trusts.

For more information on bad debts, refer to:

• Section 25-35 ITAA 1997
• TR 92/18 Income tax: bad debts.

We focus on the correct application of the rules where deductions are claimed for bad debts.