Let's talk about a mind-boggling $1.7 billion in undeserved refunds, another $2.7bn in foiled claims, roughly 56,000 plotters, and over 100 arrests so far. You might be wondering, how did this vast TikTok tax debacle spiral out of hand?
This so-called 'TikTok scheme' was pitched as a risk-free strategy, promising substantial cash rewards. Sounds tempting, right? The thing is, the streamlined process that’s a lifesaver for small businesses getting off the ground in Australia’s self-assessment system ALSO paved the way for this notorious fraud to spread like wildfire.
TikTok influencer: "Everyone else got refunds, it's fine, it's just a temporary loan [from the ATO]."
Unraveling the Mystery - How Did This Happen?!
In 2021, videos depicting an alleged 'Treasure Map' to the Australian Taxation Office (ATO)'s reserves began circulating. It wasn't a loan but a shortcut to access a hefty sum of tax-free money, no questions asked. As curiosity grew, and more people vouched for this scheme, the scam's facilitators seized the opportunity. The only catch? Handing over your personal details.
The devious plot involved these fraudsters creating sham businesses, obtaining an Australian Business Number (ABN) quite often under their names, and then submitting false Business Activity Statements (BAS) for non-existent expenses to claim GST refunds.
By late 2021, banks noticed an unusual surge in large refunds and responded by freezing dubious accounts, reporting suspicious activities to the ATO in line with Anti-Money Laundering & Counter Terrorism legislation.
April 2022 saw ATO launching Operation Protego to tackle the rapid spread of fraudulent GST refund claims made by people not even running a business. Nonetheless, catching every fraudster became a challenging game of whack-a-mole.
Uh-oh are you caught up in the saga?
“The ATO has zero tolerance to any fraudulent or corrupt behaviour that may in any way impact the ATO.”
The TikTok tax scam's impact is multi-layered, affecting around 56,000 taxpayers.
Firstly, there are the scheme's promoters and facilitators, modern-day con artists. To date, over 100 individuals, including suspected members of criminal gangs and syndicates, have been apprehended and penalized for their involvement.
Promoting a tax fraud scheme could land you a decade behind bars.
The second layer comprises those actively participating in the scheme, aka people claiming to run a business, acquiring an ABN, and filing fraudulent GST refund requests for fictitious expenses. If you've benefited from these dubious GST refunds, prepare to pay it back, face penalties, and possibly endure legal proceedings. Cooperation is crucial to minimize penalties and prevent escalation to legal action. If you haven't been contacted by the ATO but took part in this tax scam, it's imperative to work with us to promptly disclose and manage the situation.
Lastly, the unfortunate victims of identity theft whose personal information was misused to generate fraudulent GST refunds. Reports indicate that people were trading myGov details to access these questionable refunds, leaving the ATO grappling with not just the TikTok tax scandal, but identity theft's persisting threat. Keep a close watch on your myGov account, and if anything seems amiss, don't hesitate to reach out to your tax agent to have a look.
The Timeline of TikTok Fraud
“Nobody is giving money away for free or offering loans that don’t need to be paid back.” - ATO Deputy Commissioner and Chief of the Serious Financial Crime Taskforce (SFCT) John Ford.
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Late 2021 |
Banks freeze suspicious accounts and refer unusual behaviour to ATO. |
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April 2022 |
Operation Protego formed |
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May 2022 |
ATO issue a warning on fake businesses, ABN applications and fraudulent business activity statements to generate GST refunds after around $850 million in potentially fraudulent payments made to around 40,000 individuals, with the average amount fraudulently claimed being $20,000. |
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June 2022 |
ATO tallies the cost of fraudulent claims at $1.2bn. Between April and June 2022, the ATO rejected $1.7bn in fraudulent claims. ATO launches coordinated action across three days in 12 locations across NSW, Victoria, Tasmania, South Australia, Western Australia, and Queensland, which saw warrants executed against 19 individuals suspected of being involved in GST fraud. |
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July 2022 |
ATO executes search warrants for five suspected offenders. |
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Dec 2022 |
ATO tallies fraudulent rejected claims at $2.5bn by more than 53,000 individuals. |
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Feb 2023 |
Warrants executed against 10 individuals suspected of promoting the fraud including on social media. |
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Aug 2023 |
ATO tallies fraudulent rejected claims at $2.7bn. |
To sum it up, while $2.7bn in fraudulent claims were successfully intercepted, a staggering $1.7bn has slipped away. Thankfully, roughly $66m was recovered by June 30, 2022. Moreover, approximately $700m in liabilities, including an estimated $300 million in penalties, accrued in 2023-24.
In a nutshell, the TikTok tax fraud serves as a stark reminder of the perils lurking in the digital domain. However, with vigilance and the right guidance, you can safely navigate this landscape - and you can count on us to be your guiding light.
