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.