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Fraudulent GST Refunds Noticed By ATO

Registering for an ABN and applying for GST refunds when you don’t own a business or are not eligible is fraud.

The Australian Taxation Office (ATO) has identified a significant number of GST refund fraud attempts, totalling an estimated $850 million to around 40,000 individuals. This fraud involves predominantly participants inventing fake businesses to claim false refunds.

Sophisticated risk models deployed by the ATO, coupled with intelligence received from banks including through the AUSTRAC-led Fintel Alliance and the Reserve Bank of Australia, identified a recent spike in suspicious refunds. Currently, the ATO has stopped $770 million in payments from being issued.

The fraud involves offenders inventing fake businesses and Australian Business Number (ABN) applications, many in their own names, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund.

Currently, this fraudulent activity has been circulating as online advertising and content, particularly on social media and their platforms.

Reminders For The Community

  • The ATO does not offer loans. If you see someone advertising a way to get a loan from the ATO, it’s not legitimate.
  • The ATO does not administer COVID disaster payments.
  • If you are not operating a business, you do not need an ABN, and you don’t need to lodge a GST return.
  • Backdating your business registration so you can apply for a refund will flag you as high risk in our systems.
  • False declarations may impact eligibility for other government payments.
  • The ATO possess the data matching ability to detect these patterns and stop fraud.
  • If something seems too good to be true, seek independent advice from an adviser who has no connection to the arrangement before taking any action, or phone the ATO.

What This Means For Businesses:

  • Legitimate businesses may face extra steps to receive their refunds as extra controls are put in place.
  • To prevent people from lodging fraudulent claims, the ATO has engaged tighter controls around ABN and GST registration.

Were You Involved?

The ATO is urging anyone already involved to come forward now on a voluntary basis rather than face tougher consequences later. They will be recouping the funds, and there will likely be a better outcome for you if you approach them first.

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.

However, for others where there was nothing accidental or unintentional about setting up a fake business in their own name and seeking an unearned refund, harsher penalties could be faced.

If you become involved in this arrangement, you need to speak with the ATO now. They will be able to support you with a range of self-help options. You may be able to correct it yourself, the ATO may be able to assist you, or you may be referred to a trusted advisor like a tax agent (such as us) to help you.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier