Write Off Obsolete Equipment and Bad Debts - Year-End Tax Moves for Your Business

As the 2024–25 financial year-end approaches, smart businesses are already preparing to minimise taxable income and enhance their cash flow position. One often overlooked but highly effective strategy is to review your asset register and accounts receivable ledger to identify obsolete equipment and bad debts that can be written off before 30 June.

At World Wide Advisory, we work with Aussie expats, offshore businesses, and local enterprises to ensure every eligible tax-saving opportunity is captured—especially those tied to depreciation, asset management, and bad debt recovery.

🧾 Why Write-Offs Matter Before Year-End

Writing off unproductive assets or unrecoverable debts before the end of the financial year can:

• Reduce your taxable income for the year

• Improve the accuracy of your financial records

• Strengthen your balance sheet for future investment or financing

• Show the ATO proactive financial management—an important factor in audit defense

Let’s explore how these strategies work and who they’re best suited for.

🔧 Writing Off Obsolete Equipment

Every business accumulates equipment and technology that eventually becomes obsolete or unusable. Whether it’s outdated computers, broken tools, or machinery no longer in use, these assets may no longer deliver value—but they could still be sitting on your balance sheet.

✅ When Can You Claim a Deduction?

To claim a deduction for obsolescence or disposal, the asset must:

• No longer be in use

• Have no resale value

• Be written off from your fixed asset register

You may claim a deduction for the written-down value of the asset (what’s left after depreciation) under Division 40 (Depreciating Assets) of the Income Tax Assessment Act.

💡 Tip: If the asset has been scrapped or disposed of, keep documentation such as disposal records, e-waste receipts, or write-off resolutions for audit support.

🧾 Writing Off Bad Debts

Unpaid invoices are a harsh reality for many businesses. But if you’ve made reasonable efforts to recover a debt and it’s genuinely unrecoverable, it may be eligible for a tax deduction.

✅ Requirements for a Bad Debt Deduction:

• The debt must be included in assessable income in a previous financial year

• You must make a genuine attempt to recover it

• The debt must be written off in your books before 30 June

Examples include:

• Unpaid client invoices

• Contract breaches with financial loss

• Trade debts from discontinued customers

💡 For offshore entities with operations in Australia: This is particularly relevant if you're invoicing locals but reporting income offshore. Strategic write-offs must be properly accounted for to avoid ATO scrutiny under transfer pricing rules.

🌍 Special Considerations for Aussie Expats and Foreign-Owned Entities

At World Wide Advisory, we help businesses operating across borders understand how Australian tax law applies in complex scenarios. When dealing with international equipment leases, offshore receivables, or expat business operations, consider:

• Permanent establishment risks: Scrapping assets or writing off revenue-generating debts may signal a presence in Australia.

• Transfer pricing: If you're writing off debts from a related party, ensure you have documentation to show the arm’s length nature of the transaction.

• GST adjustments: If GST was reported on a now-unpaid invoice, you may be eligible to adjust the GST previously paid.

📅 Timing Is Everything: Act Before 30 June

To access these deductions for the 2024–25 year, actions must be completed before the end of the financial year. This means:

• Finalising your internal reviews

• Updating accounting records

• Keeping evidence of write-off decisions

Failing to do so could push valuable tax savings into the next year—or worse, disqualify them entirely.

✅ Key Action Points for Business Owners

• Review all equipment and fixed assets—identify anything obsolete, broken, or unused

• Examine your aged receivables—follow up with overdue accounts and assess collectability

• Write off irrecoverable debts and scrap old assets before 30 June 2025

• Maintain clear documentation for each write-off

• Seek professional advise if your business involves cross-border revenue, expat staff, or international asset ownership

📞 Ready to Reduce Your Tax Bill with Strategic Write-Offs?

Writing off obsolete equipment and bad debts is a powerful, underutilised tool in year-end tax planning. Whether you're a domestic business, Aussie expat, or foreign-owned entity with Australian income streams, timely action can unlock legitimate tax savings.

At World Wide Advisory, our team of international tax specialists is ready to help you take control of your end-of-year tax strategy with confidence and compliance.

📞 Call us today at +61 7 3180 1684

📧 Email contact@worldwideadvisory.au

Let’s optimise your year-end moves—and set your business up for a smarter 2025.