The Australian Tax Office has paid out more than $1.2billion in fraudulent GST claims after the deceitful scheme was promoted on TikTok.
The ATO believes that at least 56,000 perpetrators have taken part in the fraud, with the organisation launching Operation Protego in April 2022 to crack down on the scam after it was initially uncovered in 2021 by Westpac and other banks.
The sham was promoted on social media platform TikTok, with financial influencers using it as a way to get a “loan” from the government.
According to the ATO, the average amount raised from each fraud reached $20,000 in May 2022, with suggestions that number could have increased since then as the number of people engaged in the scheme grows.
For the fraud to work, an individual first obtains an Australian Business Number or ABN, before using a MyGov account to submit fake invoices worth tens of thousands of dollars to claim a refund on GST.
The scheme is incredibly “simple” according to H&R Block director of communications Mark Chapman, who said that he doesn’t know “how these people thought they would get away with it”.
“They’re not in business, but they basically set themselves up with an ABN and bombarded the tax office with fake invoices and saying ‘we’ll have the GST back on there thank you very much’,” he said.
“It’s incredibly straightforward and incredibly fraudulent.”
Despite GST fraud being “quite common”, the growing popularity of the scam due to social media has meant that it’s become “absolutely massive”, according to Mr Chapman.
Since Operation Protego was launched, the ATO claims it has stopped $2.7 billion from being paid to fraudsters and more than 100 suspected perpetrators have been arrested, including those with links to bikie gangs and other organised crime groups.
The ATO is also monitoring tax agents who are helping their clients claim these fraudulent expenses, with Mr Chapman saying he is aware that “lots of businesses” have been involved in the practice.
The tax office says it is continuing to address the fraud with “full force”, and has already raised $700 million in liabilities including around $300 million in penalties and interest.
Those who are caught promoting the scheme are also at risk of severe repercussions under promoter penalty laws, with Mr Chapman saying they could face fines of over $1.3 million.
“I wouldn‘t want to be one of these people who were flogging this scheme, because obviously they can be identified and the ATO is potentially going after them as well,” he said.
ATO Deputy Commissioner and Chief of the Serious Financial Crime Taskforce Will Day has flagged that the organisation will be targeting influencers who promoted the scheme.
“The people who have participated in this fraud are not anonymous. We know who they are, and we will be taking action,” he said.
“We are urging anyone involved to face the music and come forward now rather than face even tougher consequences later, including penalties and criminal charges.”
He also flagged that “criminal action” will be taken against those who are found to have committed GST fraud.
“People who have participated in this fraud may have unwittingly followed advice they have read online, claiming to help access a loan from the ATO, or receive other financial government support such as a disaster payment,” he said.
“However, for others there was nothing accidental or unintentional about setting up a fake business in their own name and seeking an unearned refund.”