How much do I actually get back when I write off a bad debt?

A write-off does not return cash — it only reduces your taxable income. The benefit is the tax you would otherwise have paid on that income: the debt amount multiplied by your company tax rate (broadly 25% for a base-rate entity or 30% for a standard company). For example, writing off a $10,000 debt at 30% returns about $3,000 in reduced tax; you still lose the other $7,000. This is general information only, not tax advice.

Is it better to write off a debt or pursue recovery?

Recovered money is full-value cash, whereas a write-off only ever returns the tax deduction. Even a partial recovery usually returns far more than writing the debt off. Because Merion works on a commission-only basis — no recovery, no fee — pursuing the debt costs nothing up front, so the comparison strongly favours recovery in most cases.

Does GST come into a bad debt write-off?

Potentially. The income-tax deduction is based on the GST-exclusive amount, but if you accounted for GST on the original sale you may also be entitled to a separate GST decreasing adjustment for the unpaid GST. The rules and timing differ from the income-tax deduction. Confirm both with a registered tax agent or the ATO.

Free tool

Bad Debt Write-Off Tax Benefit Estimator

Tempted to just write off an unpaid invoice? This estimator shows how little a write-off actually returns — only the cash value of the tax deduction — compared with recovering the debt. It is the case for pursuing recovery, in dollars.

Bad debt details

Bad debt amount (AUD)

Use the GST-exclusive income amount (the revenue you originally recognised). A separate GST decreasing adjustment may also apply to the bad debt — check with your accountant.

Company tax rate

Base-rate entities (broadly, companies with aggregated turnover under the threshold and limited passive income) are taxed at 25%; other companies at 30%. Confirm which applies to you.

Tax rate applied (%)

Estimated recovery rate if pursued (%)

Indicative only — Merion is commission-only (no recovery, no fee), so pursuing a debt costs you nothing up front. Actual recovery depends on the debtor and the circumstances.

A write-off isn't "getting something back"

Writing off a bad debt does not put cash in your pocket — it only reduces your taxable income. The benefit is limited to the tax you would otherwise have paid on that income: the debt amount multiplied by your company tax rate. On a $10,000 debt at 30%, that is just $3,000.00. You still lose the remaining $7,000.00.

By contrast, money recovered is real, full-value cash. Even a partial recovery typically returns far more than the deduction alone — which is why pursuing the debt almost always beats writing it off, especially when recovery is commission-only and costs you nothing up front.

General information only — this is not tax or financial advice. Bad-debt deductibility rules and timing requirements apply (for example, the debt generally must have been previously included in your assessable income and be genuinely written off as bad in the income year), and a separate GST decreasing adjustment may apply. Figures here are illustrative and do not reflect your specific circumstances. Confirm the tax treatment with a registered tax agent or the ATO before acting.

A write-off just reduces taxable income

It is easy to think of writing off a bad debt as "getting something back" — but it isn't. A write-off does not pay you; it only lowers the profit you are taxed on. The most a deduction can ever be worth to you is the tax you would otherwise have paid on that income, which is the debt amount multiplied by your company tax rate. Everything above that figure is simply lost.

The deduction is a fraction of the debt

At a 30% company tax rate, a written-off debt returns just 30 cents in the dollar — and only 25 cents for a base-rate entity. A $10,000 write-off therefore returns roughly $2,500–$3,000 in reduced tax, while the remaining $7,000–$7,500 stays gone. Recovered money, by contrast, comes back at full value. Even a partial recovery typically beats the deduction comfortably, which is exactly what the estimator above shows.

Recovery usually wins — and costs nothing up front

Because Merion recovers commercial debts on a commission-only basis — no recovery, no fee — pursuing a debt does not require you to spend money chasing it. That changes the maths: the realistic comparison is "the small, certain value of a tax deduction" against "full-value cash if recovery succeeds, at no up-front cost." For most overdue B2B invoices, that points firmly towards recovery. If you would still rather understand the deduction first, confirm the bad-debt and GST treatment with your accountant.

General information only — this is not tax or financial advice. Bad-debt deductibility rules and timing requirements apply (the debt generally must have been previously brought to account as assessable income and be genuinely written off as bad in the relevant income year), and a separate GST decreasing adjustment may apply. The figures here are illustrative and do not reflect your specific circumstances. Confirm the treatment with a registered tax agent or the ATO before acting.

Recover full value, not a fraction

Don't settle for the tax deduction.

A write-off returns cents in the dollar; recovery returns the lot. Merion pursues commercial debts on a commission-only basis — no recovery, no fee.

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