The Australian Taxation Office (ATO) welcomes the release of the Australian National Audit Office’s (ANAO’s) report of the ATO’s management and oversight of fraud control arrangements for the Goods and Services Tax (GST). The ANAO’s report supports the ATO’s commitment to protecting the ATO’s systems and the broader tax ecosystem from fraud.
Fraud is everyone’s concern – the threat continues to increase in pace and scale as criminals become more sophisticated in their attempts and global threats, organised crime, artificial intelligence and increased data breaches in the community mean the risk is only growing.
The ATO’s fraud detection controls are strong, and there is the need to balance making the systems easy to access for the majority of taxpayers, while preventing those who deliberately attempt to commit fraud. It is important that legitimate start-up small businesses that need cashflow get their GST refunds quickly.
As of October 2023, 150 people who worked at some point with the ATO were identified as part of the Operation Protego population.
The majority of these were former contractors or ex-employees and were not working with the ATO at the time they are suspected of committing Operation Protego fraud. In line with the broader fraud population, some of the ATO officials were victims of identity theft and were not perpetrators.
We have taken action against the small number (12) of those who were substantiated as having committed the fraud while working at the ATO. This includes termination of contract, administrative action, and criminal prosecutions.
As a result of our actions, we are not aware of anyone currently working at the ATO who is suspected of committing the fraud.
We take all fraud attempts seriously, and with continued investment in the Serious Financial Crime Taskforce, the ATO, along with our partner agencies, is equipped to take strong action against individuals suspected of being involved in tax fraud.
Overall, the GST system is operating well with the vast majority of GST revenue collected voluntarily. The ATO collected over $81 billion in GST revenue in 2022–23, a 10.5% increase on 2021–22.
The GST tax gap in Australia is 3.6% which is lower than many other similar jurisdictions. Additionally, the cost for the ATO to collect GST is 78c per $100.
We continue to strengthen our GST analytical risk models and use technology to improve our risk identification procedures and streamline processes for managing high-risk refunds. Our risk models provide our staff with a more holistic view of GST lodgments to support a better client experience and increased system integrity.
The ATO operated swiftly and decisively through Operation Protego to successfully disrupt what was a large-scale fraud event. Promoters of the fraud used social media and other channels to recruit participants. The fraud model proliferated at an unprecedented rate. The ATO continues to hold to account those people who chose to get involved in the refund fraud activity targeted by Operation Protego.
We have taken a range of compliance actions against more than 57,000 individuals, and our strategies have driven a continuous reduction in GST fraud attempts. This includes, where appropriate, proceeds of crime referrals to the Australian Federal Police and departure prohibition orders to prevent people with significant tax debt from leaving the country.
We have kept the community informed about Operation Protego since May 2022, when we first warned the community about our investigation into large-scale GST fraud.
In the wake of Operation Protego, the ATO recognised the need to examine our response to heightened GST fraud risks and has already undertaken action to strengthen and enhance our management of GST fraud, including the establishment of the Fraud and Criminal Behaviours business line to focus on further protecting the system and clients against fraud and have since implemented a range of additional fraud defences.
The ANAO report includes 5 recommendations aimed at strengthening assurance and improving responses to fraud events. The ATO has agreed to all 5 recommendations in full, and will continue to enhance our GST fraud framework, focusing on:
- Prioritising the finalisation of existing work on the roles and responsibilities for fraud prevention, detection and treatment, including redesigning the external fraud conformance process and making necessary changes to relevant Chief Executive Instructions.
- Documenting assessments of GST fraud risks regularly.
- Ensuring our fraud and corruption control plans are based on identified fraud risks that are documented in risk assessments.
- Developing a response for large-scale fraud events encompassing relevant elements as identified in the ANAO report.
- The consideration of benchmarks for ATO fraud indicators, and the removal of the ‘Attorney-General’s Department fraud benchmark’.
The ATO welcomes all suggestions for improvement to combat fraud against the tax and superannuation system. We will continue to implement and build on the recommendations identified by the ANAO, which we consider will support the already improved management and assurance of fraud control arrangements for the GST.