ATO issues warning on dodgy GST refunds amid construction, hospitality fraud boom

The ATO is cracking down on businesses in hospitality and construction over dodgy GST refund claims, amid concern the practice is spreading to new sectors supercharged by advisers selling the fake schemes.

The ATO is cautioning businesses in hospitality and construction over dodgy GST refund claims. Picture: Monique Harmer/NewsWire

Dodgy GST claims from construction companies and hospitality operations are set to be the focus for new enforcement from the Australian Taxation Office, with the tax man closely looking at the threat of jail time for company directors caught rorting returns.

The ATO said it was seriously concerned about GST fraud in property and construction, as well as the restaurant sector, noting complex companies with multiple arms were central to a recent spate of fake refund frauds.

Privately held companies turning over more than $10m a year are particularly in focus.

The ATO said it was concerned as there were “early signs of it proliferating in other industries, particularly by privately owned and wealthy groups”.

ATO assistant commissioner Adam O’Grady said this was despite warnings from the Serious Financial Crime Taskforce in 2024, putting the tax industry on notice over the GST fraud schemes.

Unlike other recent GST frauds, the ATO said this scheme was not being promoted through social media.

The ATO was hammered over the Covid-19 period by people registering fictitious businesses and lodging GST refund claims.

Instead, the ATO said real businesses were creating fake invoices and overinflating GST refund claims.

“While the numbers of businesses involved are relatively small, some are attempting to claim tens of millions of dollars in GST refunds they’re not entitled to,” Mr O’Grady said.

The ATO has warned businesses in hospitality and construction over dubious GST refund claims.

The ATO said it was concerned that advisers were selling these GST schemes to companies, with Mr O’Grady noting they were often “dressed up and sold as clever schemes with a figleaf of technical analysis”.

The alert issued by the ATO shows the tax office is aware some of these schemes are being presented as fake supply agreements providing contractual services, often described as “project management” or “consulting”.

“The contractual agreements are designed to give the arrangement the pretence of legitimacy; however, the services described in the agreements are not supplied, and key clauses are never enforced,” it says.

Payments are often not made, but then the companies still seek to claim the GST.

The ATO was given more powers to withhold refunds for up to 30 days, from July 1 this year, almost doubling the time the tax office can freeze these payments while it investigates.

Mr O’Grady, who sits across the tax office’s private wealth and behaviours of concern teams, said the ATO would look at referring companies and directors to the Department of Public Prosecution over the fraud if they were discovered.

But the ATO is concerned that some companies are using dummy directors in a bid to throw off the tax office’s investigations.

The ATO has already smashed a few of these GST fraud schemes, but declined to reveal how many companies and people had been prosecuted.

It said tens of millions of dollars had been recovered from these fraudulent schemes.

“Most businesses do the right thing,” Mr O’Grady said.

“What these others are doing is simply not fair. We’re dealing with dishonest and deliberate attempts to cheat the tax system.”

Originally published as ATO issues warning on dodgy GST refunds amid construction, hospitality fraud boom