Optus Data Breach: Six Scams To Watch Out For
TikTok’s $2 billion fraud challenge for the ATO
This is the Tax Office’s social media nightmare dilemma: you can’t take 40,000 people to court.
Neil ChenowethSenior writerThe muted alarm that Tax Office officials began sounding two weeks before the federal election over the billion-dollar TikTok fraud is probably as close to panic as public servants get.
In its May announcement the ATO said it was cracking down on an $850 billion GST fraud by 40,000 Australians.
By June, the Serious Financial Crime Task Force’s Operation Protego was executing search warrants targeting 19 people, while estimates of the fraud had risen to $1 billion involving up to 70,000 people.
Today the ATO says the number of people is probably less than 40,000, but it says it has stopped more than $2 billion in fraud payments. That’s in addition to hundreds of millions of dollars of payments that have not been retrieved. And the fraud is ongoing. The ATO discovered the latest variant of the scam on TikTok just a fortnight ago.
It’s been curiously low-profile – though at the end of the day it’s not a federal government loss because GST money goes to the states. Still, the numbers are staggering.
The fraud has been promoted on TikTok as a way to get a “loan” from the government. You register a fake business, get an ABN, register for GST and then immediately file a Business Activity Statement claiming a credit for previous (fictitious) GST payments.
New businesses need quick GST refunds for their cashflow, which the system is programmed to provide, without checks. The average take is $20,000, and people are making repeated claims.
It’s an unsophisticated fraud but that just means it’s hard for the ATO to pull money back, when many of the recipients are on welfare or have no fixed address.
The fraud exploits a loophole in the software that, to date, the ATO has been unable to close.
The scam isn’t even new – it was the scale and rate of proliferation that took the Tax Office by surprise, though that begs the question, why did it take off if it was already aware of the loophole?
Now the ATO is making it harder to get an ABN, using algorithms to flag “high-risk applicants”, while flooding the zone with personnel to personally vet ABN applications, a bit like playing Whack-a-Mole.
The Tax Man is also watching a lot of TikTok. It claims it has pulled fraud levels back close to normal, though new versions of the scam continue to evolve.
How did it get to this? And who could have sounded the alarm?
ABNs and GST registrations are overseen by the ATO’s Small Business division and Australian Business Registry Services. In theory there’s also oversight by the ATO’s enforcement arm, Integrated Compliance, headed by Deputy Commissioner Will Day, who is running Project Protego.
The ABRS Registrar is Commissioner Chris Jordan, but in practice the ABRS was run by Deputy Registrar Michelle Crosby, who has had the task of developing the registry, which has blown out to $1.5 billion, with perhaps another $1 billion still to spend. She left the ATO this month to become chief operating officer at Charles Sturt University.
Small Business was run by Deputy Commissioner Deborah Jenkins who, like Jordan, is ex-KPMG. In August, she was transferred to become acting Commissioner of the Australian Charities and Not-for-profits Commission after Gary Johns resigned.
The ATO has parachuted in Day, its most senior compliance officer, as temporary head of Small Business, while Assistant Commissioner John Ford is keeping Day’s seat warm as head of Integrated Compliance. The ATO says these changes are unrelated to Protego.
The crisis came as ATO overall debt jumped to $60.7 billion in January from $39.5 billion three years earlier.
Unsophisticated as it is, the number of participants in the TikTok fraud arguably make this one of the biggest challenges the ATO has faced in 40 years. You can’t take 40,000 people to court.
For decades, the horror of Bottom of the Harbour schemes of the 1970s – when criminal tax evasion threatened to become mainstream – was written deep in the Tax Office’s DNA.
Today, not so much. While the public face of the ATO has come to be typified by its own research that shows how successful it has been at closing the tax gap, the Tax Office is now struggling with the limits of its technology. And social media is not the tax man’s friend.
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