GST and Bad Debts
- Arnold Shields
- Dec 6, 2011
- 2 min read
Updated: Jun 10
Decreasing GST Adjustment for Bad Debts
When can you make a decreasing adjustment for GST?You may claim a decreasing GST adjustment (i.e. reduce your GST payable) if:
GST has been attributed for the supply on a prior BAS, or
You’re accounting for both the GST and the bad debt in the same BAS period (i.e. on an accrual basis and writing it off in the same period).
When do you claim the adjustment?
If written off: You account for the adjustment in the BAS period you write off the debt.
If not written off, but overdue: You can still claim the adjustment if the debt is overdue for 12 months or more, and you’ve become aware it’s uncollectible in that period.
⏳ A debt must generally be overdue for at least 12 months to be considered "bad" unless you’ve written it off earlier.
How much GST is reduced?
For a wholly taxable supply, the decreasing adjustment is:
✅ 1/11th of the amount written off as a bad debt or overdue for 12+ months.
Example:
You issued a $1,100 invoice (inc. GST) on 1 April 2023. The client never paid, and you attributed the GST ($100) in your April-June 2023 BAS.
If you write off the debt in May 2024, you can claim a $100 decreasing adjustment in your Apr-Jun 2024 BAS.
If you didn’t write it off but realise in May 2024 that it’s now 12+ months overdue and irrecoverable, you still claim it in that same period.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.
