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Writing off bad debts

If a customer owes you money, but is unlikely to pay, you can write off the bad debt. When you do this, the customer's outstanding balance is removed, your expenses are correctly updated, and any GST liability related to the sale is adjusted.

How does a bad debt affect your GST reporting?

It depends on whether you're reporting on a cash or accrual basis. 

If you're cash-based, a bad debt won't affect the GST, because the GST is only reported once the payment has been received from the customer. Since the customer never paid the invoice, no GST has been reported.

If you're accrual-based, writing off a bad debt will only affect your GST if it has already been reported and paid. In Australia, using this method to write off a bad debt will result in the customer return being included in your BAS for this period at G1 (Total sales).