The ATO has provided new details on an outback tax scam that cost it millions. 

In 2019, more than $20 million is alleged to have been illegally claimed by people in WA’s remote Kimberley region.

The Australian Taxation Office (ATO) says locals were clued into a “fraudulent scheme” that spread rapidly through communities.

The first claims reportedly came from the town of Derby, after a local ‘promoter’ of the scam began showing people how to get a payout by inflating the amount of money withheld by an employer on their tax return.

When the issue first came to light, ATO assistant commissioner, Karen Foat, said that the ‘promoter’ had been charging people money to show them how to commit the fraud.

“Some of these people were approached by a promoter of this scheme,” she said.

“And they were charged an up-front fee in order to get this information on how to get a bigger refund.

“More than 700 people did try to claim incorrect amounts worth more than $20 million, but the ATO was able to identify this issue quite quickly so only 42 people did receive incorrect refunds.”

The trick was used to secure payouts of around $50,000 for some individuals, reports say.

The ATO has since remained tight-lipped about how much money has been recovered or whether any prosecutions have occurred in relation to the scheme. 

But a parliamentary interrogation by WA Liberal Senator Dean Smith has helped fill some of those gaps. 

He questioned an ATO representative about the matter in June, but the agency took most of his questions on notice. Mr Smith received a written response in early August revealing the size of the rort. 

“Altogether, 50 clients had refunds issued totalling approximately $1 million,” the agency wrote to the Senate Estimates Legislation Committee.

“These 50 clients received an average incorrect refund of $21,180.”

Some locals have said that those who received the fraudulent windfall quickly spent the money on day-to-day needs like cars, homewares and shopping trips.

The ATO says it is working to get the money back. 

"Compliance activity has been undertaken on all 50 clients … all have had debts raised for the incorrect refunds received,” the ATO submitted to parliament.

“Recovery actions, including arrangements to pay, are being considered on a case-by-case basis per our usual processes.”

The ATO has refused to say whether the ‘promoter’ that first pushed the scheme has been identified or charged “due to the risk of prejudicing operations”.