Unpaid GST surge has helped blow a $50b hole in revenue
A near three-fold explosion in unpaid GST debt in the past six years is fuelling a surge in owed taxes to close to $50 billion at the same time the Tax Office has been struggling to control a $4.6 billion wave of fraudulent GST refund claims ignited via the viral spread of the scam on TikTok.
Collectable tax debt has more than doubled since 2017 from $20.9 billion to an estimated $50 billion, budget papers reveal. The biggest part of that surge has been GST debt, which went from $11.3 billion to $27.3 billion as of June 30, 2022, and is expected to rise to more than $30 billion in yet to be released ATO accounts. The debt represents tax bills that are uncontested but which the ATO has not been able to raise.
As tax debts have mounted, the ATO has been trying to get on top of the TikTok-fuelled fraud wave that started in late 2020. The scam involved more than 56,000 people who obtained an Australian Business Number then used their myGov account to file fraudulent business activity statements to claim GST refunds.
The ATO has blocked $2.7 billion of fraudulent claims and paid out another $1.6 billion in the TikTok scam. It has added $300 million in penalties and interest.
In all, the ATO has levied tax debts of $1.9 billion on the fraud, almost all of which is outstanding. It is estimated this would have added $1.4 billion to the collectable debt total in 2023.
“This was absolutely foreseeable, the way the ATO during COVID didn’t shut down small businesses that were trading while insolvent,” a tax lawyer told AFR Weekend. “It was quite obvious to insolvency practitioners that these were zombie companies.
“Once COVID started there was no further debt collection. If those companies were insolvent pre-COVID, they continued to
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