TikTok Tax Scandal Unveiled

Posted at 17:04h in Fraud, News by Simmons Livingstone

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The ‘TikTok tax scandal’ was promoted as a victimless hack that resulted in a staggering $1.7 billion paid out in fraudulent refunds, with an additional $2.7 billion in fraudulent claims halted.

Over 56,000 individuals have been implicated, and more than 100 arrests have been made to date. But how did this tax fraud scheme spiral out of control?

The TikTok tax hack was portrayed as a victimless shortcut to infuse substantial sums into your bank account. Much like any hack, participation was alarmingly simple—just follow the instructions. The very streamlined process that was designed to facilitate the ease of starting a small business within Australia’s self-assessment system inadvertently paved the way for the ‘TikTok fraud’ to go viral.

So, how did it all unfold?

Sometime in 2021, videos began circulating, outlining the method to compel the Australian Taxation Office (ATO) to deposit funds directly into your bank account. It was not quite a loan but a hack that, on occasion, deposited tens of thousands without any questions asked. As the message gained traction, and with more individuals vouching for its legitimacy, facilitators emerged. The only requirement was to share your personal details with these facilitators, and they would handle the rest.

The perpetrators behind this scheme fabricated fake businesses, acquired Australian Business Numbers (ABNs), often in their own names, and subsequently submitted fake Business Activity Statements (BAS) to claim GST refunds.

By late 2021, banks began noticing suspicious activity—large refunds that deviated from the typical behaviour of these accounts. In some instances, Centrelink recipients started receiving substantial credits from the ATO. The banks promptly froze several accounts and reported these suspicious transactions, as required under Anti-Money Laundering & Counter-Terrorism legislation.

In April 2022, the ATO initiated Operation Protego to disrupt the escalating GST refund fraud by individuals not genuinely operating businesses. Unfortunately, by that time, the strategy had already gone viral.

Fast forward to May 2022, and the average GST refund paid was a staggering $20,000, claimed by approximately 40,000 individuals. The ATO acknowledged that around $850 million had been paid out in potentially fraudulent claims. By June 2022, this figure had ballooned to $1.2 billion. However, the ATO managed to successfully prevent $1.7 billion in fraudulent claims. This prompted search warrants and the subsequent arrests of scheme promoters.

It remains a question as to how so many (approximately 56,000 Australians) came to believe that a hack had been uncovered, enabling them to claim substantial tax refunds as a ‘loan’ from the ATO. The ATO is not known for its random acts of generosity or relaxed attitude toward tax revenue.

Why so many individuals accepted a viewpoint propagated on TikTok—participating in the fraud required falsifying records at multiple stages—raises further questions. Unfortunately, claiming naivety is not a compelling defence against fraud.

The TikTok tax fraud is extensive, impacting the lives of the 56,000 taxpayers ensnared in its web.

The Impacts:

Scheme promoters and facilitators: Over 100 individuals have been arrested, including members of outlaw motorcycle gangs, organised criminal organisations, and youth crime gangs, with more than 10 people convicted.
Maximum penalty for promoting a tax fraud scheme: 10 years in prison.
Active participants in the scheme: Those who declared they were running a business, obtained an ABN, and submitted fraudulent GST refund claims for nonexistent expenses. For those who received these illicit refunds, repayment will be required, penalties may apply, and criminal proceedings may be pursued.
If the ATO contacts you, engagement will be essential to mitigate penalties and prevent potential criminal proceedings.

If you were involved in the GST refund fraud and haven’t been contacted by the ATO yet, it’s crucial to collaborate with your trusted advisor as soon as possible to disclose and manage the issue.