The unpaid account needs a separate GST bad-debt review

The recovery discussion overlooks a separate tax question

A hypothetical business has spent months pursuing a modest taxable invoice. The owner assumes the GST previously reported on the sale must remain unchanged because the customer has not paid. Refer the account to the registered tax adviser for a separate review. Recovery prospects and GST treatment are related facts, but a decision about one does not automatically answer the other.

Confirm what was originally reported

Provide the original invoice, relevant activity statements, credits and receipt history. Ask the adviser to confirm the GST accounting basis and treatment actually used. Do not assume that a sales report proves an amount was included in a lodged statement. Keep any change of method or correction visible rather than selecting whichever report produces the most favourable result.

Identify the relevant adjustment question

The ATO explains that, for non-cash GST accounting, qualifying unpaid taxable sales may give rise to a decreasing adjustment when a debt is written off as bad or has been overdue for twelve months or more. Ask the tax adviser to assess every applicable requirement and the correct period. This does not establish that this invoice qualifies or that a cash refund will follow.

Source: ATO: Deductions for unrecoverable income, GST and bad debts

Supply the debt history honestly

In the hypothetical example, prepare the actual due date, recovery attempts and any write-off decision with its supporting records. Identify part payments, credits, disputes or settlement terms. Do not backdate a decision or describe a forgiven amount as an ordinary unpaid invoice to obtain a preferred result. Let the adviser distinguish the relevant facts rather than treating every old debtor balance identically.

Keep legal recovery decisions separate

Ask the recovery adviser what remains appropriate for the underlying claim and any deadlines. Do not tell the customer that a proposed tax adjustment releases the debt or changes the contractual balance. Equally, do not promise suppliers money from an assumed tax outcome. Keep the possible adjustment labelled as unconfirmed until the adviser explains its treatment and practical effect.

Retain the advice and monitor later events

Save the calculation, reporting decision and source records with the account. Tell the tax adviser if money is later recovered or the debt position changes, so any further treatment can be assessed. CRP can help organise the commercial recovery history. The useful outcome is a properly checked tax question alongside the recovery plan, rather than silently overlooking it or using an unsupported adjustment to improve cash forecasts.