Latest news with #FourCorners
RNZ News
2 days ago
- Business
- RNZ News
How Australia's tax office lost billions in a simple scam
Photo: 123rf By Angus Grigg , Neil Chenoweth and Kyle Taylor , ABC News It was a scam so simple it took just minutes on your phone, where you could tell the tax office how much money to pay you, and it came through within days. The ATO loophole was so vast that tens of thousands of Australians stole a total of A$2 billion (NZ$2.2b). It was Australia's largest GST fraud. But it did not need to be this way. New details uncovered by Four Corners show the ATO was warned its systems were badly lacking, but even when it eventually discovered the fraud, it continued to pay out hundreds of millions of dollars. The ATO maintains it cracked down hard on the scam, moving quickly to shut down the perpetrators and cut off the money. The case of Linden Phillips would suggest otherwise. It showcases in granular detail the ATO's failures and how, while some loopholes are closed, others are being exploited on a far larger scale. Linden Phillips was no criminal mastermind, but from his home in the Victorian river town of Mildura, he easily exploited giant flaws in the ATO's GST refund system. It was August 2021, and Phillips had just been released from jail. According to court filings, a week after his release, he "opened several bank accounts" in his own name and registered a previously created ABN for GST. That was step one. Next was proof of concept. This could have taken just two minutes and involved putting just three numbers into the ATO's systems. The ATO has only recovered A$96 million — just 5 per cent of the money stolen from the tax system. Photo: Four Corners/Sissy Reyes/ABC News Phillips did this by logging into his myGov account - available on your phone - and going to the ATO's GST page. Here, he said his fictitious earth-moving business had recorded minimal sales for the month. Phillips then said he was entitled to A$13,158 (NZ$14,364) as a GST refund. Amazingly, he did not have to specify why this was. At this stage, no one was required to check the veracity of his Business Activity Statement before paying. The ATO simply assumed he had invested in stock or capital equipment during the quarter. As the court noted, "the appellant [Phillips] did not engage in a business and had no income or outgoings for such a business". Within a week, the money was in his bank account. That was the trial run. Phillips was only just getting started. The next month, he lodged 46 separate GST refund claims seeking A$821,279 (NZ$896,000) from the ATO. The problem was that Phillips had been in jail for most of the time covered by these claims. Despite this, the ATO paid up promptly. Once again, the ATO had not made a single inquiry before paying the money. The algorithm in its system, rather than any human, approved the refund. To claim such a giant GST refund, Phillips would have needed to spend around A$9.7 million (NZ$10.6m) on his business over three years. All this while having minimal sales, yet enough cash flow to not bother claiming the GST refund each month. Somehow, this was not a red flag when the ATO was paying out the money. Just weeks after Phillips made his second claim, someone at the ATO twigged that his enterprise may not be legitimate. Finally, there was a human in the loop. An ATO officer rang Phillips and was told the statements had been prepared by his accountant, for which he provided a name and number. "The number was in fact registered to a different person… not an accountant but a painter," according to the court documents. The ATO followed up with a letter to Phillips, which he ignored. As he did to further calls and emails from the ATO. Despite the suspicious behaviour, the ATO did nothing. In the meantime, Phillips bought himself a Porsche and his mother a house. The ATO would sit on its hands for the next four months, giving pause to its claim to have cracked down hard and quickly brought the scam under control. When Phillips was caught, it had nothing to do with the ATO. He was arrested in April 2022 by Mildura detective Vanessa Power, who was searching his home looking for drugs and guns. She checked Phillips's phone and "identified a series of fraudulent ATO claims", according to Victoria Police. That led police to a further 63 offenders in the Mildura area. It was around this time that the ATO began to take the threat seriously. Four months after it first identified a problem with Phillips's GST refunds, the ATO launched Operation Protego, led by its Serious Financial Crimes taskforce. By this time, the ATO estimates A$850 million (NZ$928m) had been stolen from the tax system. Phillips was able to exploit the flaws in the ATO's GST refund scheme from his home in Mildura. Photo: Four Corners/Sissy Reyes/ABC News While Protego was operating, then-federal assistant treasurer Stephen Jones said it was "pretty easy to work out whether" someone had lodged a "legitimate" GST claim. "There's lots of analytics that the ATO can do to work out whether this is a legitimate business or not," he said. That may have been true, but the ATO was not identifying many of these false claims until after the money had been paid. It would take the tax office 18 months to get the scam under control, and by this time, A$2 billion had been stolen from the tax system. The ATO said when it launched Operation Protego that it assigned 470 extra staff to verify GST claims, and that by May 2022, "almost all fraud attempts were being stopped". All up, the ATO estimated 57,000 people were involved in the scam. Of these, just 122 have been convicted, while the ATO has only recovered A$96 million (NZ$105m) - just 5 percent of the money stolen from the tax system. The banks have helped recover another $64 million (NZ$70m) by freezing accounts. In the years leading up to the scam, the ATO's analysis showed its fraud detection systems, which should have prevented the scam, were not up to scratch. A 2018 report unearthed by Four Corners outlined how the systems were lacking. The report's author, Ali Noroozi, spent 10 years as the inspector-general of taxation. Citing the ATO's internal data, he found that its so-called risk assessment systems were only marginally better than random selection. "They have certainly been on notice that their risk assessment tools could do better," Noroozi told Four Corners. Ali Noroozi was the inspector general of taxation for a decade. Photo: Four Corners/Sissy Reyes/ABC News The tax office was slow to heed this warning, and then it also downgraded its assessment of external fraud risks from "severe" to "low" two months before the scam took off in mid-2021. It said the likelihood of risk had gone from "almost certain" to "rare". The tax office said it began building and updating new fraud detection systems even before the critical 2018 inspector-general report. But the auditor general noted one of the ATO's new fraud detection systems ran a year late and was therefore not fully switched on until January 2022. At this point, it successfully detected the massive fraud, but it still took the tax office a further three months to launch Operation Protego. The auditor general found "the ATO did not have a procedure to respond to a large-scale external fraud event" like the GST scams. Tax experts said these processes need humans in the loop. "Before money goes out the door, particularly if there's been large changes in a taxpayer's details or accounts, that should be verified," said Karen Payne, who stepped down last year as inspector-general of taxation. "Once upon a time, there was a desk audit when you first lodged your GST return to make sure you are carrying on a business that you can verify and these amounts that you're claiming are legitimate." Karen Payne says there needs to be proper verification before "money goes out the door". Photo: Four Corners/Sissy Reyes/ABC News As the Abbott government swept to power in 2013, the ATO was moving away from this model of human verification to an automated system. That would eventually see about 1000 staff - or half the people in the division responsible for the GST - lose their jobs. "I'm not sure the ATO has ever recovered from that sort of drain of knowledge and drain of skill sets," said Stephen Hathway, a liquidator currently investigating a large-scale GST fraud. "The people [at the ATO] work really hard and diligently, but there just needs to be more of them. And there needs to be more regard to getting out there in the field and making those inquiries." While the ATO has claimed to have contained smaller-scale GST frauds as part of Operation Protego, it has struggled to stop loopholes being exploited by larger-scale scams. Stephen Hathway has seen this up close. Stephen Hathway is a liquidator who currently investigates large-scale GST fraud. Photo: Four Corners/Sissy Reyes/ABC News He is currently chasing Nahi Gazal, who claims to be a wealthy Sydney property developer, but has been accused of masterminding a giant GST fraud. Gazal and his associates managed to squeeze more than $21 million (NZ$23m) out of the tax office in GST refunds. They allegedly used fake invoices to claim GST refunds for building projects that either did not exist or had been completed by other developers. Once again, the ATO did not bother to do even the most basic of checks. "It never had any legitimacy," Hathway said. "There's nothing in it that ever demonstrates any act of commerce or enterprise. The whole set of transactions were completely and utterly made up, fraudulent, had no basis." By September 2023, the ATO had issued Gazal with a $44 million (NZ$48m) tax bill, including penalty interest. Four Corners can reveal that while the ATO was chasing Gazal for that money, it failed to detect that he was using a new string of companies to continue scamming the tax office. Hathway has been funded by the ATO to pursue Gazal over this latest scheme, and has connected him to an additional 22 companies, which Hathway said had fraudulently claimed another $25 million (NZ$28.3) in GST refunds. Once again, Gazal claimed to be a property developer. "Not one bag of nails was bought from Bunnings," Hathway said. But once again, the ATO did not check before paying out the GST refunds to Gazal's companies. Hathway said the ATO never asked basic questions, like the address of the properties being developed, whether a development application had been approved, or to even look at a building contract. "I'm the liquidator after the event. And then when we're looking into the file, we find nothing," Hathway said. Hathway was not hopeful the ATO would be able to recover much of the money, and said there was nothing to stop someone else doing the same thing. Karen Payne said the tax office needed to do better, as these frauds resulted in less money for essential services. "We should all care because it raises revenues that allow the government… to fund the services that we all benefit from… health, defence, security, infrastructure… it's a pretty key part of our democracy." - ABC News
ABC News
2 days ago
- Business
- ABC News
The ATO learned it was being scammed, then paid out millions more to fraudsters
It was a scam so simple it took just minutes on your phone, where you could tell the tax office how much money to pay you, and it came through within days. The ATO loophole was so vast, tens of thousands of Australians stole a total of $2 billion. It was Australia's largest GST fraud. But it did not need to be this way. New details uncovered by Four Corners show the ATO was warned its systems were badly lacking, but even when it eventually discovered the fraud, it continued to pay out hundreds of millions of dollars. The ATO maintains it cracked down hard on the scam, moving quickly to shut down the perpetrators and cut off the money. The case of Linden Phillips would suggest otherwise. It showcases in granular detail the ATO's failures and how, while some loopholes are closed, others are being exploited on a far larger scale. Linden Phillips was no criminal mastermind, but from his home in the Victorian river town of Mildura, he easily exploited giant flaws in the ATO's GST refund system. It was August 2021, and Phillips had just been released from jail. According to court filings, a week after his release, he "opened several bank accounts" in his own name and registered a previously created ABN for GST. That was step one. Next was proof of concept. This could have taken just two minutes and involved putting just three numbers into the ATO's systems. Phillips did this by logging into his myGov account — available on your phone — and going to the ATO's GST page. Here, he said his fictitious earth-moving business had recorded minimal sales for the month. Phillips then said he was entitled to $13,158 as a GST refund. Amazingly, he did not have to specify why this was. At this stage, no one was required to check the veracity of his Business Activity Statement before paying. The ATO simply assumed he had invested in stock or capital equipment during the quarter. As the court noted, "the appellant [Phillips] did not engage in a business and had no income or outgoings for such a business". Within a week, the money was in his bank account. That was the trial run. Phillips was only just getting started. The next month, he lodged 46 separate GST refund claims seeking $821,279 from the ATO. The problem was that Phillips had been in jail for most of the time covered by these claims. Despite this, the ATO paid up promptly. Once again, the ATO had not made a single inquiry before paying the money. The algorithm in its system, rather than any human, approved the refund. To claim such a giant GST refund, Phillips would have needed to spend around $9.7 million on his business over three years. All this while having minimal sales, yet enough cash flow to not bother claiming the GST refund each month. Somehow, this was not a red flag when the ATO was paying out the money. Just weeks after Phillips made his second claim, someone at the ATO twigged that his enterprise may not be legitimate. Finally, there was a human in the loop. An ATO officer rang Phillips and was told the statements had been prepared by his accountant, for which he provided a name and number. "The number was in fact registered to a different person … not an accountant but a painter," according to the court documents. The ATO followed up with a letter to Phillips, which he ignored. As he did to further calls and emails from the ATO. Despite the suspicious behaviour, the ATO did nothing. In the meantime, Phillips bought himself a Porsche and his mother a house. The ATO would sit on its hands for the next four months, giving pause to its claim to have cracked down hard and quickly brought the scam under control. When Phillips was caught, it had nothing to do with the ATO. He was arrested in April 2022 by Mildura detective Vanessa Power, who was searching his home looking for drugs and guns. She checked Phillips's phone and "identified a series of fraudulent ATO claims," according to Victoria Police. That led police to a further 63 other offenders in the Mildura area. It was around this time that the ATO began to take the threat seriously. Four months after it first identified a problem with Phillips's GST refunds, the ATO launched Operation Protego, led by its Serious Financial Crimes taskforce. By this time, the ATO estimates $850 million had been stolen from the tax system. While Protego was operating, then-federal assistant treasurer Stephen Jones said it was "pretty easy to work out whether" some had lodged a "legitimate" GST claim or not. "There's lots of analytics that the ATO can do to work out whether this is a legitimate business or not," he said. That may have been true, but the ATO was not identifying many of these false claims until after the money had been paid. It would take the tax office 18 months to get the scam under control, and by this time, $2 billion had been stolen from the tax system. The ATO said when it launched Operation Protego that it assigned 470 extra staff to verify GST claims, and that by May 2022, "almost all fraud attempts were being stopped". All up, the ATO estimated 57,000 people were involved in the scam. Of these, just 122 have been convicted, while the ATO has only recovered $96 million — just 5 per cent of the money stolen from the tax system. The banks have helped recover another $64 million by freezing accounts. In the years leading up to the scam, the ATO's analysis showed its fraud detection systems, which should have prevented the scam, were not up to scratch. A 2018 report unearthed by Four Corners outlined how the systems were lacking. The report's author, Ali Noroozi, spent 10 years as the inspector general of taxation. Citing the ATO's internal data, he found that its so-called risk assessment systems were only marginally better than random selection. "They have certainly been on notice that their risk assessment tools could do better," Mr Noroozi told Four Corners. The tax office was slow to heed this warning, and then it also downgraded its assessment of external fraud risks from "severe" to "low" two months before the scam took off in mid-2021. It said the likelihood of risk had gone from "almost certain" to "rare". The tax office said it began building and updating new fraud detection systems even before the critical 2018 inspector general report. But the auditor general noted one of the ATO's new fraud detection systems ran a year late and was therefore not fully switched on until January 2022. At this point, it successfully detected the massive fraud, but it still took the tax office a further three months to launch Operation Protego. The auditor general found "the ATO did not have a procedure to respond to a large-scale external fraud event" like the GST scams. Watch as Four Corners investigates one of the most powerful and secretive institutions in the country, tonight on ABC TV and ABC iview. Tax experts said these processes need humans in the loop. "Before money goes out the door, particularly if there's been large changes in a taxpayer's details or accounts, that should be verified," said Karen Payne, who stepped down last year as inspector general of taxation. "Once upon a time, there was a desk audit when you first lodged your GST return to make sure you are carrying on a business that you can verify and these amounts that you're claiming are legitimate." As the Abbott government swept to power in 2013, the ATO was moving away from this model of human verification to an automated system. That would eventually see around 1,000 staff — or half the people in the division responsible for the GST — lose their jobs. "I'm not sure the ATO has ever recovered from that sort of drain of knowledge and drain of skill sets," said Stephen Hathway, a liquidator currently investigating a large-scale GST fraud. "The people [at the ATO] work really hard and diligently, but there just needs to be more of them. And there needs to be more regard to getting out there in the field and making those inquiries." While the ATO has claimed to have contained smaller-scale GST frauds as part of Operation Protego, it has struggled to stop loopholes being exploited by larger-scale scams. Stephen Hathway has seen this up close. He is currently chasing Nahi Gazal, who claims to be a wealthy Sydney property developer, but has been accused of masterminding a giant GST fraud. Gazal and his associates managed to squeeze more than $21 million out of the tax office in GST refunds. They allegedly used fake invoices to claim GST refunds for building projects that either did not exist or had been completed by other developers. Once again, the ATO did not bother to do even the most basic of checks. "It never had any legitimacy," Mr Hathway said. "There's nothing in it that ever demonstrates any act of commerce or enterprise. The whole set of transactions were completely and utterly made up, fraudulent, had no basis." By September 2023, the ATO had issued Gazal with a $44 million tax bill, including penalty interest. Four Corners can reveal that while the ATO was chasing Gazal for that money, it failed to detect that he was using a new string of companies to continue scamming the tax office. Mr Hathway has been funded by the ATO to pursue Gazal over this latest scheme, and has connected him to an additional 22 companies, which Mr Hathway said have fraudulently claimed another $25 million in GST refunds. Once again, Gazal claimed to be a property developer. "Not one bag of nails was bought from Bunnings," Mr Hathway said. But once again, the ATO did not check before paying out the GST refunds to Gazal's companies. Mr Hathway said the ATO never asked basic questions, like the address of the properties being developed, whether a development application had been approved, or to even look at a building contract. "I'm the liquidator after the event. And then when we're looking into the file, we find nothing," Mr Hathway said. Mr Hathway was not hopeful the ATO would be able to recover much of the money, and said there was nothing to stop someone else from doing the same thing. Karen Payne said the tax office needed to do better, as these frauds resulted in less money for essential services. "We should all care because it raises revenues that allow the government … to fund the services that we all benefit from … health, defence, security, infrastructure … it's pretty key part of our democracy." Watch Four Corners' full investigation into the tax system, No Return, tonight from 8:30pm on ABC TV and ABC iview.
ABC News
6 days ago
- Business
- ABC News
No Return: Australia's Missing Billions
The ATO is one of the most powerful and secretive institutions in the country, but for years, it's operated without effective scrutiny. In this major Four Corners investigation, award-winning financial journalists Neil Chenoweth and Angus Grigg reveal how inaction and flawed systems have allowed more than $50 billion in tax to go uncollected. They unpick how a simple scam, supercharged on social media, saw tens of thousands of Australians fraudulently claim at least $2 billion in GST refunds. They also show how corporate operators extracted millions more through fake invoices and phantom construction projects, often without triggering even basic checks. And they expose how deep cuts, digital automation and a lack of independent oversight has left one of Australia's most powerful institutions wide open to exploitation. Born of years of forensic reporting by two of Australia's most respected financial journalists in collaboration with the ABC's investigations team, No Return exposes systemic failures inside one of the nation's most opaque institutions. It demonstrates why every taxpayer should demand accountability from the very agency entrusted to uphold it. No Return, reported by Angus Grigg and Neil Chenoweth, and produced by Kyle Taylor, goes to air on Monday 28 July at 8:30pm on ABC TV and ABC iview.
CBS News
6 days ago
- Climate
- CBS News
Northern California's mild July continues. When will the triple-digit heat return?
This July has been too good to be true. Northern California has been one of the coolest spots in the country with fall-like temperatures in what's typically our hottest time of the year. Since mid-July, there hasn't been a hint of a major heatwave. Daytime highs across the Sacramento Valley have hovered consistently in the 80s, and just this Tuesday, many spots didn't even reach the upper 80s, a rarity for a typical summer. So when will the heat return, and could we be looking at late summer? It's possible. The driver for our mild weather lately has been a consistent weather pattern. Northern California has been sandwiched between two areas of high pressure, one to the north in the Gulf of Alaska and one to the southeast over the Four Corners region. This setup has created just enough space for troughs of low pressure to dip in, enhancing the coastal marine layer and fueling a strong Delta Breeze. This Delta Breeze acts like nature's air conditioner, a steady, onshore flow of cool air that not only brings relief in the mornings and evenings, but has been strong enough lately to keep even our afternoons mild. Keeping us out of any summertime heat. Patterns like this are stubborn, and current trends suggest it may hold through early August. So if you've been enjoying this cool-down, there's a good chance it will stick around a bit longer. Typically, July is one of the hottest months of the year in Northern California, often bringing multiple heatwaves and triple-digit temperatures across the Valley. But this year? Not the same. In 2024, Sacramento saw 16 days of highs at or above 100 degrees in July alone. Meanwhile, this July has so far brought only one day of 100-degree temperatures to Sacramento, on July 11. During July, Sacramento averages a high of 93 degrees. Looking at this July, we've only seen eight days at or above that number, with more than half the month below average. Historically, Sacramento's hottest stretch of the year runs from July 9 through August 5, when average highs peak at 93 degrees. So yes, we're technically in our summer prime, but it certainly hasn't felt like it. If we keep our stretch of mild highs through the end of the month with no other triple digits, we could tie a three-decade record. As the last time Sacramento saw only one 100° day in July was back in 1993. Expect highs in the low 80s to continue across the Valley through the rest of the week and into the weekend. In the Sierra and foothills, temperatures will stay comfortably in the 70s and 80s over the next seven days. Starting Wednesday afternoon through Saturday, daily thunderstorms are likely across the Sierra thanks to growing atmospheric instability. The best chances will be along the Sierra crest and eastern slopes. With best chances along the Sierra crest and eastern slopes. These storms will not be big rain-producers, yet storm threats will mainly be dry lightning, small hail, gusty winds and brief heavy rain. The dry lightning risk will keep fire danger elevated through the weekend. If you have any outdoor plans in the mountains, Sunday looks to be the best day with fewer storms expected. Temperatures begin to climb again toward the end of the month, with highs returning to the low and mid-90s by July 28–29. But even as we warm up, the overall pattern through the end of July and early August keeps California among the coolest regions in the country. According to the latest outlook from the Climate Prediction Center, below-average temperatures are likely to continue over the next 6–10 days. Make sure to stay with the CBS Sacramento First Alert weather team for updates to our mild summer pattern.
Daily Mail
6 days ago
- Politics
- Daily Mail
Four Corners 'meltdown' two hours before going to air. Plus, blind gossip hints at media Lothario's dark side... and which TV star has meth on his mind? INSIDE MAIL
By and JO SCRIMSHIRE and NICHOLAS COMINO and PETER VAN ONSELEN, POLITICAL EDITOR FOR DAILY MAIL AUSTRALIA Published: | Sore corners In case you missed it, Four Corners poured a steaming bucket of s*** on Melbourne neurosurgeon Greg Malham this week, digging Sorry we are not currently accepting comments on this article.
