150 ATO officials investigated in massive TikTok GST fraud crackdown

Some 150 Australian Taxation Office (ATO) officials have been investigated as part of a massive GST fraud crackdown, resulting in criminal proceedings and employment terminations, according to a bombshell report from the Auditor-General.

In the final paragraphs of a 75-page report, the Auditor-General on Tuesday revealed that officials working for the ATO found themselves within the crosshairs of Operation Protego — the response to a tax fraud scandal that resulted in the payment of at least $2 billion in bogus GST refunds.

The ATO confirmed to the Australian National Audit Office that, as of October 2023, 150 ATO-related officials “suspected of Operation Protego behaviours” have been investigated through the tax office’s own internal fraud procedures.

“A range of treatment strategies have been applied by the ATO, including termination of employment and criminal investigations,” the report said.

The report does not detail the “behaviours” allegedly undertaken by those ATO officials, nor how many officials under investigation were fired or faced criminal investigation.

But for the first time, the report suggests the GST fraud scam — in which individuals acquired an ABN and fabricated business expenses to claim a false GST refund — not only spread through the Australian community, but rattled the ATO itself.

More detail on massive GST fraud

More broadly, the report revealed criminal investigations into the GST fraud epidemic resulted in more than 100 arrests and 16 convictions as of August 31 last year .

It also spells out the startling size of the GST fraud, which proliferated through TikTok videos that claimed the scam allowed perpetrators to obtain a ‘loan’ from the tax office.

Some $2 billion in false payouts were identified as of June 30 last year, with a further $2.7 billion in suspect GST refunds stopped before they hit an attempted fraudster’s account.

The maximum fraudulent refund was approximately $2.4 million, according to the Auditor-General report, with attempted claims stretching up to $32.3 million.

As of August 31, 2023, the ATO managed to recoup $123 million of the refunds in question, using methods like bank account garnishing, which accounted for $67.6 million of recoveries.

Additional penalties of $120 million were administered as of June 30, 2023.

Statutory interest totalled $220 million at the end of August 2023, and will continue to balloon on unpaid liabilities.

Beyond the individuals who watched a TikTok video and set up a dummy ABN in their own name, the report revealed some Australians also had their identities stolen to participate in the scam.

“The ATO has identified individuals who have had their identity stolen and used to lodge fictitious BAS [Business Activity Statements] or have been coerced into participating or providing credentials to third parties,” it said.

More than 57,000 people are considered participants in Operation Protego, the report added.

ATO agrees to reform recommendations

Beyond the concerning findings about ATO officials who faced investigation, the Auditor-General report gave mixed marks to the tax office for its detection and prevention of GST fraud.

The tax office has “largely effective strategies to detect and deal with GST fraud but does not have a strategy to deal with large-scale fraud events,” it found.

The report found Operation Protego itself was launched only after the ATO determined the scale of attempted GST fraud “exceeded the ATO’s business-as-usual capacity to treat”.

In terms of prevention, “the framework for assessing and managing GST fraud risk is not fit for purpose,” the report added, with confusion over roles and responsibilities making the oversight and monitoring of GST fraud “partly effective”.

The Auditor-General handed down five recommendations for the ATO, including:

• Revising, clarifying, and documenting roles and responsibilities for fraud prevention, detection, and treatment;
• Conducting regular assessments of GST fraud risks;
• Basing fraud control and corruption plans on identified risks included in risk assessments;
• Developing and launching a sophisticated response to large-scale fraud events, like those covered by Operation Protego; and
• Considering alternative benchmarks for what constitutes fraud.

The ATO agreed to all five recommendations.