Can I claim GST back if a customer doesn't pay me?

Yes, if you are on the Invoice Basis, you can claim the GST component back as a credit adjustment once you have officially written the debt off in your accounting records.

Do I need to hire a debt collector before claiming a bad debt?

Not necessarily, but you must show you have made 'reasonable efforts' to collect. Following up with reminders and formal demands is usually sufficient evidence for the IRD.

How do I show a bad debt on my GST return?

You include the GST component of the written-off debt in Box 13 (GST on purchases and adjustments) of your GST101 return.

Verified for 2026 Tax Year

GST on Bad Debts: Claiming Back Tax on Unpaid Invoices

Did a customer skip out on a bill? Here is how to claim back the GST you've already paid to the IRD on that unpaid work.

If you use the Invoice Basis for your GST, you pay GST to the IRD as soon as you invoice a customer. If that customer never pays you, you've effectively paid the IRD out of your own pocket. Fortunately, the "Bad Debt" rules allow you to recover this money.

The Eligibility Rule

You can only claim a GST adjustment for a bad debt if you have already included the sale in a previous GST return and paid the tax. (This rule doesn't apply to those on the Payments Basis, as they never paid the GST in the first place).

When can you claim a Bad Debt?

You cannot claim a debt just because it is overdue. You must be able to prove that the debt is actually "bad". The IRD generally requires:

✓ The debt has been written off in your accounts (General Ledger).
✓ You have made reasonable efforts to recover the money (emails, calls, or debt collection).
✓ The debt has been outstanding for a significant period.

The "Write-Off" is Key

You must physically write the debt off in your accounting software (like Xero or MYOB) before or during the GST period in which you make the claim.

How to Calculate the Adjustment

Amount Written Off × 3 ÷ 23 = GST Refund Amount

For example, if you write off a $1,150 unpaid invoice, you claim back $150 in your next GST return by including it in your "Credit Adjustments" (Box 13).

What if they pay later?

If you claim a bad debt adjustment and the customer later pays you (or a portion of it), you must treat that payment as a new sale and pay the GST back to the IRD in that period.