Tax leak as tradies borrow Bunnings ABN

Tradesmen are ­allegedly operating in the black economy by fraudulently quoting Bunnings’ ABN on ­invoices.

Apprentice plumber Tyrone Pepretti, who uses a legitimate ABN, stocks up at a Bunnings store outside Darwin yesterday. Picture: Amos Aikman

Thousands of tradesmen are ­allegedly operating in the black economy by fraudulently quoting hardware chain Bunnings’ Australian Business Number on ­invoices, as part of a scam that is undermining the tax system.

Treasury’s black economy taskforce chairman, Michael ­Andrew, admitted that the ­17-year-old ABN regime — ushered in with the introduction of the GST to ensure people did not ­escape the tax system — was “not ­working”.

Much of the ABN fraud has had two unwitting victims: Bunnings and the taxpayer. Abuse of the Bunnings ABN has been rife, particularly in some parts of the country, potentially costing the government hundreds of millions of dollars.

Bunnings now has one of the most quoted ABNs in the country.

“We found out that more than 40 per cent of ABNs quoted in the Northern Territory were Bunnings,” Mr Andrew said. “Of course, every tradesman goes to Bunnings. They get an invoice — the ABN’s up top.”

Mr Andrew said the Bunnings ABN scam occurred when ­businesses or individuals employing the services of tradesmen and other service providers asked for an invoice.

The document is ­provided containing the bogus ABN: “People ask for an invoice or valid receipt and they get the name of the company, but they then get an ABN of someone else such as Bunnings: the result of which (is) you can’t trace then where the money really went.”

Fourth-year apprentice plum­ber Tyrone Pepretti, who hails from Gove in northeast Arnhem Land but now lives in Darwin, said he had an ABN that he used ­strictly according to regulation. “I just put it on everything,” Mr ­Pepretti said.

He said customers often asked for an invoice, although “not so much for cash jobs”.

“There’s no real benefit in not putting your ABN on there,” Mr Pepretti said. “It might work if you were pretty dodgy. There might be a few guys out there who do that, I suppose.”

Bunnings did not respond to requests for comment by The Australian’s deadline last night. There is no suggestion Bunnings has done anything wrong.

Another prominent tax industry voice will today lend his weight to suggestions of an emerging ­crisis in the ABN system.

CPA Australia’s policy boss Paul Drum will submit to the government that the ABN system “is in serious and urgent need of an overhaul”.

Mr Drum, a member of the government’s national tax liaison group, will say in his submission that businesses are “exploiting weaknesses in the ABN system by quoting incorrect ABNs, creating multiple ABNs or improperly using an ABN, including sham contractor arrangements”.

In an interview that also ­involved Mr Drum, Mr Andrew said he was proposing “to make sure we can verify ABNs on a real-time basis” to ensure that people were not dealing with ­operators with a “fictitious” ABN.

He was blunt in his assessment of the ABN regime introduced in 2000. “Effectively, the ABN system is not working,” he said. “We have 3.5 million ABNs who have never lodged a tax statement or a tax return.

“We issued 180,000 ABNs last year to people on tourist visas who are not allowed to have an ABN. We’re seeing secretaries and receptionists out there with ABNs at the moment. So we have to basically work to put more integrity and governance around the issuing of ABNs and make sure that they’re something that is valued, not something which is just automatically issued.”

Mr Andrew said the ABN ­crisis was related to labour ­shortages in areas of the economy that were vulnerable to criminal activity.

“Australia has labour short­ages in certain segments and certain geographies,” he said. “What that does is open up an opportunity for organised crime to take a lot of illegal labour into Australia, offering substantial discounts because they pay cash or below award wages substantially, to pick fruit or …. where there is a major issue like the Commonwealth Games or the NDIS.”

The problems were also partly caused by massive structural shifts in the economy. “There’s this huge shift from employment to contracting where we are actually seeing people now basically incorporate entities and operate as an independent contractor, avoid superannuation guarantee, payroll tax (and) get lower tax rates,” Mr Andrew said.

“And fundamentally, there’s very little regulatory framework or governance around this.”

Mr Drum said the migration of employees to contractor ­status, as the PAYG system erodes, was reminiscent of a trend in the 1980s.

The black economy taskforce is due to deliver its final findings to the government by October.