The Australian Tax Office (ATO) has accused influencers on TikTok of perpetuating the largest tax fraud in Australian history.
The ATO has admitted paying out over $780 million (AUD$1.2 billion) in fake GST claims, after a viral trend exploded on the platform in mid-2021, after a slow emergence the year earlier. Hundreds of financial influencers allegedly encouraged their followers in a 'life hack' to obtain ‘a loan’ from the government by registering for an Australian Business Number (ABN), then through their Australian taxation portal (MyGov), apply for GST refunds on large, falsified expenses they would’ve incurred in setting up a new business. The scam involved submitting fake invoices worth up to hundreds of thousands of dollars in a bid to claim back refunds on GST.
The fraud was first uncovered by Australian bank Westpac (amongst others), who began noticing hundreds of suspicious transactions from customers who were otherwise on social benefit support, yet were suddenly receiving hefty business payments of over AUD$100,000 from the ATO. The banks then reported these matters back to the Tax Office, but after being frustrated by an alleged lack of action, escalated the matter to the Reserve Bank of Australia and consequently, the Treasury in February of 2022.
The action prompted the ATO to then launch ‘Operation Protego’ in April of last year, with the Australian Federal Police conducting a number of raids that have led to over 100 arrests and compliance actions against 56,000 people so far, in accordance with the Australian Financial Review. The scam has also infiltrated past financial influencers, with several of the arrests reportedly involving Australian ‘Bikie’ gang members (motorcycle gangs) and members of organised crime.
It’s estimated that the total fraudulent activity amount is valued at AUD$4.6 billion. Penalties of around AUD$300 million have also been issued, with AUD$66 million recuperated by the ATO so far, largely due to accounts frozen by Westpac and other affected banks.
ATO’s deputy commissioner and chief of the Serious Financial Crime Taskforce, Will Day, has stated that the Government office will be cracking down on influencers who are found to be promoting the scheme. He cited that the identities of these groups and individuals will not remain anonymous for long, and significant repercussions will follow including criminal prosecution.
The historic scandal sheds new and very tangible light on the state of misinformation on social media and the liabilities of following influencer-led advice, fanning the flames for critics who believe that outlets such as TikTok are a breeding ground for falsified content.
The Australian Government has not yet announced any new regulations as a result of the incident but has stated they’re working with the relevant online platforms to mitigate the risk of this scheme continuing, as well as locate and hold to account any participating individuals.