July 25, 2022

ATO Warns Against GST Fraud

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

Sophisticated risk models deployed by the Australian Taxation Office (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. The ATO has identified a significant number of GST refund fraud attempts, estimating a total of $850 million to approximately 40,000 individuals.

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.

This fraudulent activity has been circulating as online advertising and content, particularly on social media platforms. Currently, the ATO has stopped $770 million in payments from being issued to such fraudsters.

Red Flags for Small Business Owners

Not great with finance lingo and concerned you might get preyed upon? Here are some red flags to help you identify what is not legitimate:

🚩 The ATO does not offer loans or administer COVID disaster payments. If you see someone advertising a way to get a loan or disaster payment from the ATO, it’s not legitimate.

🚩 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 the ATO’s system.

🚩 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.

Implications for all 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 have engaged tighter controls around ABN and GST registration.

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What to do if you were you involved (willingly or unwillingly)

The ATO is urging anyone already involved to come forward now on a voluntary basis. For those who may have unknowingly participated in this fraud by following advice or links online, the ATO will seek to recoup the funds.

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 – there will likely be a better outcome for you if you approach them first. The ATO 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 to help you. Concerned your small business may have fallen prey to fraudsters? Get in touch with our team of experts for further assistance today!

Filed Under: Small Business Tax

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