Bad Debts
<h2 >What is 'Bad Debt'</h2>
<p >Bad debt is debt that is not <a href="http://www.investopedia.com/terms/c/collectible.asp" >collectible</a> and therefore worthless to the creditor. Bad debt is usually a product of the <a href="http://www.investopedia.com/terms/d/debtor.asp" >debtor</a> going into <a href="http://www.investopedia.com/terms/b/bankruptcy.asp" >bankruptcy</a> but may also occur when the <a href="http://www.investopedia.com/terms/c/creditor.asp" >creditor's</a> cost of pursuing the debt collection activities is more than the amount of the debt. Once a debt is considered bad, the business may be able to write it off as an expense on its income tax return.</p>
<h3 >What this Ruling is about</h3>
<p ><a name="P1" id="P1" > </a>1. This Ruling clarifies the circumstances in which a deduction for bad debts will be allowable. In particular, the Ruling explains the operation of paragraph 63(1)(b) of the Income Tax Assessment Act 1936 (the Act) in relation to taxpayers in the business of the lending of money. <strong >The Ruling does not attempt to provide guidance on bad debts in relation to consumer lending such as small personal loans or credit card debts. </strong>A separate Ruling will issue on consumer lending.</p>