Over 150 Australian Taxation Office (ATO) staff are under investigation for involvement in a GST fraud scheme.

An auditor-general's report released this week criticises the ATO's fraud control measures and risk management concerning GST, highlighting a system that is deficient in combating fraud.

The scheme, extensively promoted on TikTok, involved more than 57,000 individuals concocting a fraudulent method to extract “loans” from the government by registering fictitious businesses, obtaining Australian Business Numbers (ABNs), registering for GST, and then falsely claiming GST credits. 

The magnitude of the fraud is considerable, with at least 100 arrests made outside of the ATO and 16 people already convicted.

Authorities are grappling with a fraud that has not only implicated ATO staff but has also spread across the nation, leading to an $850 million crackdown announced by the ATO in May 2023. 

This operation, dubbed Operation Protego, has since escalated, with the fraud's estimated value soaring to $1 billion, implicating up to 70,000 individuals.

The report sheds light on the significant financial impact of this scam, with over $2 billion in primary liabilities raised and $2.7 billion in suspect GST refunds halted. 

The ATO has received more than 4700 tip-offs since the 2019-20 fiscal year, indicating a vigilant public eye but also showcasing the scale of this fraudulent activity.

Despite collecting more than $81 billion in GST annually, the ATO's oversight and fraud reporting mechanisms have been found wanting, with the auditor-general warning that the current system's effectiveness is only partial at best. 

The report specifically points out the lack of clarity in internal roles and responsibilities as a contributing factor to this failure.

In response to the escalating crisis, the ATO has agreed to implement five recommendations from the auditor-general, including the establishment of a Fraud and Criminal Behaviours Unit aimed at bolstering its defences against such fraudulent activities. 

However, the scheme's detection owes much to vigilance from financial institutions like Westpac and proactive steps by some bank staff who, frustrated with the ATO's inaction, escalated their concerns to higher authorities, ultimately sparking a broader investigation.

More details are accessible here.