Yes. Write-off and collection are two different things. The ATO's bad debt deduction rule requires the debt to be written off as bad in the income year, recorded in writing, previously brought to account as assessable income, and genuinely irrecoverable at the time of write-off. Nothing in those criteria says you have to stop chasing. If you recover some or all of it later, you bring that amount back to account as assessable income in the year you receive it. Confirm the mechanics with your accountant. eCollect handles the recovery, not the tax return.
EOFY Debt Recovery Checklist
Written by James Woods, Managing Director
Written by James Woods, Managing Director
At a glance
Outstanding debts become harder to recover the longer they sit unpaid, act before June 30.
Recovering a debt and writing one off are two separate decisions with different timing rules.
June 20 is the real deadline, Final Demands need 10 working days to resolve before EOFY.
Writing off a bad debt does not mean stopping collection, anything recovered later is simply brought back as assessable income.
Table of Contents
What can you actually recover before June 30?
Between mid-April and 30 June, there are only a few weeks to review outstanding debts, make recovery decisions, and finalise any write-offs before the financial year closes. The challenge isn't collecting every dollar. It's identifying which debts are still recoverable and which are genuinely unrecoverable.
Those are two different decisions. Recovering a debt is an operational decision. Writing off a debt is a tax decision. Under ATO rules, a bad debt generally needs to have been previously recognised as assessable income, be genuinely unrecoverable, and be written off during the relevant income year to qualify for a deduction.
The value of acting early is reflected in the ATO's own debt book. The ATO's collectible debt grew from $26.5 billion in 2019 to more than $50 billion by 30 June 2025. The ATO has also noted that more than half of this debt is less than 12 months old, which is typically when recovery prospects are strongest. The same principle applies to business debtors. The longer an account remains unpaid, the harder it often becomes to recover.
For accounts that have moved beyond internal reminders, professional recovery helps assess whether the debt is still realistically collectible. This is often where a debt collection agency Australia can add value, especially for debts over 60 days old that are no longer responding to standard follow-ups.
How to get started
Skip ahead to the seven-step checklist below. It's the same sequence we run for clients across our debt recovery services, built around the June 30 cut-off and the June 20 lodgement deadline.
Three moves first
Age your ledger this week, not in June. Triage in April. Execute through May. Start in June and you've already lost the 60-90 bucket.
Separate the write-off decision from the collection decision. Writing off a debt doesn't mean you stop trying to recover it. It simply locks in the tax position, nothing more.
Escalate anything 60+ days now, not at 90. Earlier action improves outcomes. A small business debt collection agency will typically recover more on a 60-day file than a 95-day one, simply because contact is fresher and response rates are higher.
The Checklist
Seven steps to clean books by June 30
Run them in order. Skip none.
Step 1: Reconcile the debtors ledger
Match every open invoice to bank receipts, credit notes, and disputes. Anything sitting in "overdue" because of an unresolved short-pay or a duplicate invoice isn't a debt. It's a process failure. Get those off the chase list first.
For B2B ledgers with larger account-level exposure, the cleaner the reconciliation, the easier the handover to commercial debt collection if the balance does need to escalate. Don't send a Final Demand on a disputed invoice. You'll lose the moral high ground and the legal one.
Step 2: Age the debt
Drop everything into four buckets: 0-30, 30-60, 60-90, 90+. This isn't just a Xero report. It's your action map. The 0-30 bucket is in-house work. The 30-60 needs a structured Final Demand. The 60-90 should already be on its way out the door. The 90+ needs a legal review on top of collections, because the statute-of-limitations clock is real and it's ticking.
Step 3: Categorise by recovery likelihood
Inside each age bucket, sort debtors into four states.
Live (responsive, paying slowly),
Slow (responsive but stalling),
Stalled (gone quiet), and
Dead (no contact, no payment, no realistic path).
That categorisation drives the next two steps. Live and slow get a personalised Final Demand. Stalled gets escalated. Death gets written off, and possibly still handed over.
Step 4: Send Final Demands, segment the tone
Don't send the same letter to every debtor. A long-term customer facing cash flow pressure needs a different tone to someone who repeatedly pays late.
Segmented, personalised Final Demands typically lift response rates by 20–30% compared to generic templates. Loyal slow-payers usually respond better to a relationship-focused approach, while habitual late-payers respond more to clear consequences.
For higher-balance ledgers where the relationship still matters, escalation to corporate debt collection is often more effective than relying on a one-size-fits-all demand letter.
Step 5: Escalate at 60 days, not 90
This is where most businesses bleed money. They wait until 90 to outsource. By then the contact details are stale, the verbal promises are forgotten, and the paper trail is buried. Escalating at 60 captures fresher data and a meaningfully higher recovery rate.
If you're a bookkeeper or accountant managing client ledgers, accounting and bookkeeping debt recovery referrals at the 60-day mark consistently outperform 90-day handovers. Construction is one of the clearest examples. ASIC reported 24% of all corporate insolvencies in the first 8 months of FY25-26 came from construction. If you're owed money by a builder, construction debt collection at 60 days isn't aggressive. It’s advisable.
Step 6: Write off the genuinely dead debt before June 30
This is the tax side of the decision. The ATO sets out a few key conditions for claiming a bad debt deduction. The debt needs to be written off as bad and recorded in writing before the end of the income year, it must have already been included as assessable income, and it has to be genuinely irrecoverable.
For businesses registered on a non-cash GST basis, there may also be a GST adjustment available if the debt is written off as bad, or if it has been overdue for 12 months or more. It’s always best to confirm the details with your accountant, as rules can vary depending on your structure.
eCollect focuses on recovery, not tax advice. But writing off a debt doesn’t mean the file is closed. See the next section.
Step 7: Reset the AR process for FY26
Use the EOFY close to fix what caused the problem. Tighter payment terms. Credit checks on new accounts above a threshold. Automated reminders at 7, 14, and 21 days. Earlier triage rules so nothing sits at 60+ unattended. The real cost of bad debt isn't the write-off. It's the time it stole from the business. There's a separate conversation worth having on why you shouldn't procrastinate on debt payments, and FY26 is the year to stop.
What's still recoverable, by age bucket
We focus on realistic, transparent numbers based on industry benchmarks and external sources, rather than internal performance claims.
The 90+ drop isn't just because the debtor's gone cold. It's because your own records have. Phone numbers change. Staff who logged the verbal promise have moved on. The paper trail's buried under twelve months of newer invoices. The earlier you outsource, the more of your own work the agency can actually use.
Write it off. Then keep chasing.
Most CFOs treat a write-off as a signal to close the file. It isn’t. A write-off simply locks in the tax position for the income year. It doesn’t mean you have to stop trying to recover the debt, or that collection activity on your behalf has to end.
What happens when the internal team treats write-off as "we've given up" is a self-fulfilling prophecy. The debtor senses the pressure has dropped and pays even later, or not at all. Keep collections running after the write-off. Anything recovered post write-off is upside, and it gets brought back to account as assessable income in the year it's recovered.
Collection continues within the ACCC's contact rules. A maximum of 3 phone calls a week or 10 a month, weekday contact between 7:30am-9pm and weekends 9am-9pm. Those rules don't change because you've written the debt off. For full detail on what's permitted, see debt collection legal and compliance.
Property is a clear example. Rent overdue is often written off for tax purposes, but that doesn’t change the fact that the tenant still owes the money. Recovery efforts don’t automatically stop at EOFY, and ongoing pursuit through real estate debt collection can continue where it makes commercial sense.
Use June 30 as the deadline
Tell debtors the file will move to collections on July 1. Don’t frame it as a threat. Treat it as a scheduled step. The wording matters. “Our books close on June 30. Any unpaid balance on this account will be transferred to our external collections partner on July 1.” This is a planned escalation, not a reaction. Debtors often pay at this stage to avoid escalation.
Plenty of them pay precisely because they don't want to find out why you shouldn't ignore a debt collection agency.
Use the deadline. It only comes around once a year.
Hand it over before June 20. We'll do the rest.
Free Debt Terminator assessment. No-win-no-fee.
Final Demands lodged before June 20 so they can be resolved before June 30, helping ensure any deductions fall in the right income year and your books close cleanly.
FAQs
Three key requirements apply. The debt must be written off as bad and recorded in writing before the end of the income year. It must have been previously brought to account as assessable income, or relate to money lent in the ordinary course of a money-lending business. And it must be genuinely irrecoverable, supported by reasonable recovery attempts.
The decision should be properly documented through board minutes, file notes, or a clear email trail, as this may be required if the ATO reviews the deduction. This is a tax matter, so confirm how it applies to your business with your accountant.
It depends on the age and the debtor. A 30-day $800 invoice from a regular customer is worth a phone call. A 120-day $800 invoice from a debtor you can't locate is worth writing off and possibly handing over on a no-win-no-fee basis, since the cost to chase is zero to you. Don't let arbitrary dollar thresholds drive the decision. Let recovery likelihood and the cost of chase drive it.
June 20 is the practical cut-off. We need roughly 10 working days to lodge a Final Demand, give the debtor the statutory response window, and either secure payment or escalate before June 30. Anything handed over after June 20 will likely close in early July, which is still fine commercially but won't help you crystallise the write-off in the current income year. Reading this in early June? Still time. Reading this on June 25? We'll still take it. Just understand the timing.
The income tax deduction usually applies only if the debt was previously treated as assessable income. Under accrual accounting, that’s when the invoice is raised. Under cash accounting, income is only recognised on receipt, so an unpaid invoice may not have been taxed, which changes the deduction outcome.
GST treatment can also differ depending on your structure, as noted above. It’s worth confirming the details with your accountant before June 30.
Anything not written off before June 30 sits on your FY26 ledger as an open receivable. The chase continues, but the deduction window has closed for FY25. The other thing worth flagging is the calendar. The post-EOFY months bleed into the Christmas shutdown, and the dynamics around debt collection and the festive season make Q2 recovery harder than Q1. Clear the deck now.
The income tax deduction usually applies only if the debt was previously treated as assessable income. For accrual accounting, that’s typically when the invoice is raised. For cash accounting, income is only recognised when payment is received, so an unpaid invoice may never have been counted as income, which changes the tax outcome.
GST treatment can also differ depending on your structure, as noted above. It’s the kind of detail worth confirming with your accountant before June 30.
A heads-up for FY26. From 1 July 2025, ATO general interest charge (GIC) and shortfall interest charge (SIC) are no longer tax-deductible. Charges incurred before that date remain deductible. If you're carrying ATO debt yourself, factor it into your own EOFY planning.
References
James Woods
Managing Director
James has operated businesses since his late teens including windsurfer hire (1977 – 1981), yacht charter (1990 – 2001), motor accident repairs (1984 – 1989) and debt recovery (2002 to the present). He holds a B.A. and LL.B. from Monash University and was admitted as a lawyer in 1983. He is also a Graduate of the Australian Institute of Company Directors.
Let’s recover your debts without the stress
We make debt recovery simple, fast, and results-driven. Upload your files, track progress in real-time, and only pay when we collect.
Together, we deliver complete debt solutions
From proactive receivables management through to complex legal recoveries, the eCollect Group provides an integrated, transparent, and results-driven solution — powered by technology, guided by expertise, and delivered by people who treat your business like their own.
Trusted in Australia, New Zealand & Beyond
Melbourne
03 8611 2600
Level 9, 461 Bourke Street, Melbourne VIC 3000
Sydney
02 9191 9699
Level 6, 115 Pitt Street Sydney NSW 2000
Brisbane
07 3123 4031
Level 38/71 Eagle Street Brisbane QLD 4000
Auckland
+64 9 951 8000
27E/16 Gore Street, Auckland Central, Auckland 1010
UK - eRecoveries
erecoveries.co.uk
Our eRecoveries service based in UK applying high-end technology to cover the full receivables management process for you
eCollect
Our core debt recovery and collection service, operating across Melbourne, Sydney, Brisbane, and Auckland.
E C Legal
Specialist legal support for debt and credit matters, based in Australia.
eclegal.com.aueReceivables
Designed for Australian receivables management and credit operations, uniting intelligent software with real operational expertise.
ereceivables.com.aueRecoveries
Expanding our debt recovery expertise across the United Kingdom market, supported by advanced systems, industry trained specialists and a proven no-recovery, no-charge model.
erecoveries.co.uk