An old debt recovery can require a review of the earlier GST adjustment
Link a recovered old receivable to its prior GST bad-debt adjustment so the adviser can assess the increasing adjustment separately from the bank receipt.
Corporate Recovery Partners
01 / 06
The unexpected receipt has a tax history
An old customer unexpectedly pays an invoice that the business had treated as a bad debt. Accounts is pleased to close the recovery task, but nobody checks whether a GST adjustment was previously claimed. Send the receipt and original tax treatment to the tax adviser. The bank movement is real, yet its reporting may depend on what happened when the account was first written off.
Locate the original invoice, write-off record, relevant activity statement and the adviser's supporting calculation. Identify whether a GST adjustment was actually made rather than assuming every accounting write-off involved one. Keep income tax treatment separate from GST. If records were moved between accounting systems, retrieve the earlier working instead of treating the current ledger description as the complete history.
The ATO explains that recovering some or all of a debt after a GST decreasing adjustment can require an increasing adjustment in the recovery period. Ask the tax adviser to apply the relevant conditions and accounting basis. This article does not determine your adjustment or say that every receipt against an old account has identical GST consequences.
Imagine one transfer covers part of an old written-off invoice and part of a recent sale. Give the adviser the customer's allocation and supporting account history. Do not treat the whole transfer as a recovery of the old bad debt, or record the old invoice as a fresh sale merely to make a bank reconciliation work. Explain any uncertainty before reporting.
If an agent retained a fee, provide the gross recovery, deduction and net remittance separately. Ask the adviser to determine the relevant tax treatment rather than applying an assumed fraction to whatever reached the bank. Preserve evidence of the actual receipt date and any reversal. A promised payment and a recovered amount are different events for the review.
Record the tax adviser's instructions and the reporting action taken, with a link back to the original adjustment. Correct any earlier bookkeeping assumption through the authorised process. The recovery can improve cash while also creating a reporting task. Recognising both effects prevents a welcome old payment from becoming an unexplained difference in the next activity statement.
