Identifying falsified tax claims, including those by identity fraudsters
The ATO takes a firm stance with people claiming tax refunds that they are not entitled to and with those who facilitate false tax refund claims.
These attempts to defraud the Australian community can involve one-off actions by taxpayers through deliberate:
- over claiming of deductions such as work related expenses
- claiming tax offsets they are not entitled to, or
- creating false payment summaries.
There are also co-ordinated attempts to lodge large numbers of false returns, some of which involve identity takeover.
Some taxpayers, when contacted by the ATO, have indicated that they actually do not have a spouse, contrary to what they claimed on their tax return. Others have used falsified payment summaries that suggest a large overpayment of tax by an employer.
In other cases, some unregistered tax return preparers appear to be involved in assisting taxpayers to falsify their returns.
This fraudulent behaviour is clearly not acceptable, and can result in the ATO imposing penalties and taking additional action, leading in some cases to criminal prosecution and possible imprisonment.
Tax Commissioner Michael D'Ascenzo said the ATO has invested in new technology.
"This technology is designed specifically to help us identify sophisticated, organised activities, such as identity crime, through to the most basic of scams."
"These tools are proving to be extremely efficient at identifying suspect claims for refunds and ensuring that Australia's revenue is protected."
"We have the will, the resources, and the systems in place to detect fraudulent activity," Mr D'Ascenzo said.
Since 1 July 2010, more than 7000 suspect income tax returns have been stopped for review, associated with refund claims of around $30 million. Last year the ATO detected around 26,000 suspect income tax lodgments worth about $120 million in refund claims. Refund verification activities undertaken by the ATO confirmed that over 90% of returns reviewed included invalid claims.
A number of fraudulent refund claims are also being lodged through registered tax agents. The ATO is reminding registered tax agents of the need for good due diligence practices, particularly when determining whether to take on a new client.
An example of a tax agent with good due diligence practices
A person claiming to represent ten new clients went to a tax agent to lodge their returns. The payment summaries presented did not seem right. The font was different and they looked as thought they had been photo copied and new figures overtyped.
In addition two clients requested refunds to go to a bank account that was not their own. The bank accounts were different but held at the same bank branch.
The occupations that they provided seemed unlikely, for example, a manager at a well known organisation.
The tax agent contacted the employers named on the payment summaries and was told that they had not employed these taxpayers.
One of the clients requested a refund of his fee and elected to go elsewhere when told that his tax return was delayed as they had to verify his payment summary with his employer.
The tax agent reported the matter to the ATO and provided the documentation that had been submitted. If these taxpayers attempt to lodge with another tax agent or through any other method their returns will be stopped, reviewed and action will be taken.
Tax agents can report any suspicious behaviour to the ATO on 13 72 86 - fast key code 34 (between 8.00am and 6.00pm Monday to Friday).
Some taxation refund fraud involves an element of false or stolen identity. Identity crime is a fast growing crime around the world. The ATO takes a firm stance on identity 'fraudsters' and has a commitment to protect honest citizens from those that seek to abuse Australia's tax system.
What is identity crime?
Identity crime occurs when a person uses an identity that is not their own to do something illegal.
Profile of an identity fraudster
John is always out of money and looking for a get rich quick scheme. One afternoon he starts talking to Steve at the local hotel, and Steve offers to help him out. Steve offers to sell him some stolen identities which they can use for a tax return scam.
Armed with ten stolen identities John lodged income tax returns directly with the ATO over the internet. The deductions and tax offsets claimed amounted to substantial refunds, which were deposited into bank accounts set up using the stolen identities.
Unfortunately for John, the ATO's computer systems detected a potential fraud occurring that triggered an investigation.
A joint effort involving the ATO, Victoria Police, and the Commonwealth Department of Public Prosecutions, led to John's arrest.
John pleaded guilty to obtaining and attempting to obtain financial advantage by deception in connection to identity crime. He was sentenced to 18 months imprisonment, fined $5,000, put on a 12 month good behaviour bond and ordered to repay the defrauded funds of over $58,000 back to the ATO.
In the sentencing hearing, the judge described the fraud as "a sophisticated scheme involving a number of layers of identity fraud."
For more information about protecting your identity visit www.ato.gov.au/identitycrime
To find out how to make an anonymous report to the ATO about tax evasion, visit www.ato.gov.au/reportevasion
Help is available for identity crime victims
The ATO has established a Client Identity Support Centre which provides a practical service to taxpayers who have had their identities compromised (stolen, misused, or lost).
The service provides support and assistance needed by victims of identity crime to resolve the problems they may face. For example, issuing a new tax file number (TFN) and resolving other problems caused by the identity compromise (for instance, when a tax return has been fraudulently lodged in the victim's name).
The team also focuses on ensuring internal ATO processes and practices do not negatively effect the victim's experience with the ATO.
To find out more, visit www.ato.gov.au or call the Client Identity Support Centre on 1800 179 647.