7.3.1.10 Writing-off a Debt

Writing-off a debt

An FA debt (1.1.D.60) may be written off if:

  • it is legally irrecoverable, or
  • the debtor has no capacity to repay the debt, or
  • the whereabouts of the debtor is unknown after all reasonable efforts to locate the debtor have been made, or
  • it is not considered cost effective to take action to recover the debt.

If a debt arises because of FA(Admin)Act section 28(2) or 28(6) (which deal with when income tax returns have not been lodged), an FA debt may be written off if:

  • the individual and their partner ceased to be members of the same couple after the end of the income year that began 2 years after the beginning of the cancellation income year,
  • the individual was required to lodge an income tax return for the cancellation income year - an assessment is or has been made under the Income Tax Assessment Act 1936 of the individual's taxable income for the cancellation income year,
  • in any case - the ex-partner was required to lodge an income tax return for the cancellation income year but still had not done so by the time when the individual and their ex-partner ceased to be members of the same couple.

Act reference: FA(Admin)Act section 95(2) Secretary may write off debt if debt irrecoverable or debt will not be repaid etc., section 95(4A) Secretary may write off subsection 28(2) or (6) debt if claimant and partner separate

Policy reference: FA Guide 7.3.1.20 Legally Irrecoverable Debts, 7.3.1.30 Capacity to Pay a Debt

Date of effect

If the Secretary decides to write off a debt, the date of effect is either:

  • the day on which the decision is made, or
  • the day specified in the decision.

Act reference: FA(Admin)Act section 95(5) When decision under subsection (1) takes effect

Right to recover a debt that has been written off

Writing off a debt does not finalise the debt. Action may subsequently be taken for its recovery if the Secretary determines it is reasonable to do so.

Example: Tyrone has a debt to the Commonwealth. His debt has been written off because his whereabouts for the past 3 years were unknown. Tyrone then makes a claim for family assistance and provides a copy of his tax return from the previous financial year. The Secretary may take action to recover the amount that was previously written off.

Act reference: FA(Admin)Act section 95(6) Debt that has been written off may be recovered

Last reviewed: 6 February 2017