Are you dealing with aged debts that are affecting your business cash flow? Before considering writing
them off for tax purposes, it’s essential to follow the correct process to ensure compliance with IRD guidelines and optimise your financial position.
In New Zealand, debts cannot be written off for tax purposes until all reasonable efforts to collect them have been made. Here’s the recommended process:
- Pass the debt to a professional debt collection agency first. Debt collectors are experts in recovering unpaid debts, and this step ensures you’ve made every effort to collect before writing off the debt.
- Wait for collection efforts to be completed. Only once the debt has been pursued and deemed uncollectible can you move forward with considering it for a write-off.
- Consult your accountant about whether the debt can be written off. If it is truly uncollectible, they can guide you through the process of adjusting your books for tax purposes.
- If you’re registered for GST, make sure to adjust for any invoice-basis GST that was previously claimed on the debt. Your accountant can assist with these adjustments.
Take action before the end of the financial year (EOFY) to keep your records clean and your cash flow healthy. By managing aged debts properly, you can avoid potential issues with the IRD and ensure that your business finances stay in order.
With over 30 years of experience working with more than 200 businesses across a wide range of industries, I bring a strong mix of business insight, technical expertise, and leadership to drive results. From startups to global enterprises, I have played a key role in overcoming challenges, driving growth, and streamlining processes. I’m passionate about empowering businesses and individuals, building strong relationships, and delivering lasting value. Specialising in debt collection, I help organisations manage their receivables and improve cash flow, ensuring long-term success.
My expertise covers crafting business strategies, optimising processes, mentoring leaders, and providing guidance on IT Service Management and debt recovery solutions.