A Taxman’s Casebook: Debt forgiveness, debt provisions and write-offs

Most businesses assume they can only claim a tax deduction on a bad debt once they have written it off or raised a formal provision. That assumption is costing them money. Under Section 11(j) of the Income Tax Act, where IFRS 9 is not applied to trade debtors, a 25% tax allowance kicks in automatically once a debt hits 60 days overdue. At 120 days, that rises to 40%. No accounting provision required. No subjective judgement call on whether the debt is "truly doubtful." If the debt is old enough, the relief is yours. Many businesses are quietly leaving this money on the table simply because no one told them the rules changed.