GST Refund Fraud: A Growing Concern for Businesses

GST refund fraud is now a major concern for the Australian Taxation Office (ATO), and there are good reasons for this.

While most businesses do the right thing, a growing number of fraudulent GST claims have led to billions in losses. The ATO is cracking down hard, so it’s important to know what’s allowed and what could land you in serious trouble.

What is GST refund fraud?

The ATO recently released Taxpayer Alert TA 2025/2, warning about more schemes with inflated or fake GST refund claims.

These scams often include:

• False invoicing between related parties
• Claiming GST credits for purchases that never happened
• Using fake ABNs or setting up dummy businesses just to lodge fake Business Activity Statements (BAS) and claim refunds

A well-known example is Operation Protego, a scam spread on social media that got people to apply for an ABN and claim large GST refunds without having a real business.

The result?

• Over $2 billion in fraudulent claims
• More than 57,000 people are involved
• Jail terms of up to seven years for offenders

The ATO has recovered some of the money, but many people are still facing criminal charges, and investigations are ongoing.

What is the ATO doing about it?

The ATO is increasing its enforcement. Businesses that claim large GST refunds, especially those with related parties or expensive assets, are being watched more closely.

Starting from 1 July 2025, the ATO have new powers to:

• Hold GST refunds for up to 30 days if a claim seems suspicious.
• Use this time to check and confirm the claim before paying out any money.

And here’s the big one:

Even if you didn’t set up the scheme, you can still be held responsible if you are involved in any way, such as being a participant, a bookkeeper, or even just referring to a friend.

If you promote or encourage others to take part, promoter penalty laws could also apply to you.

What should you do?

To stay on the safe side:

• Only claim GST on genuine business expenses
• Keep good records, including tax invoices and proof of payment
• Be cautious of anything that seems too good to be true
• Ask questions if you’re unsure, especially when working with related parties or unusual arrangements

If you think you’ve made a mistake or got involved in something questionable without knowing, think about making a voluntary disclosure to the ATO. Acting early can lower penalties and show you are taking the issue seriously.