GST fraud crackdown could hit legitimate claims

Tony Greco of the Australian Institute of Public Affairs (IPA) has stated that the crackdown on GST fraud by the ATO is going to hurt legitimate businesses that get caught in the crossfire. 

The $850 million of fraudulent refunds that the ATO have sought to investigate will ultimately leave some businesses with a cash-flow crisis due to the lengthy delays that they will face.

Additional validation steps that were announced in early May will be used to identify the fraudulent returns from the legitimate ones. This can cause serious cash flow issues as the delays are lengthy and they disrupt the delicate order that businesses have learned to operate within the parameters of. 

Mr Greco laments that the fraudsters are exploiting the trust that is needed for the system to work properly and is putting others in an unfair situation. 

Once GST was introduced, the quarterly BAS system operated with a level of trust that the lodger was compliant with the GST system. It has become apparent that people have been exploiting this opportunity and it may take many months or years to unravel the problem. 

In the interim, legitimate businesses will likely need to wait longer for returns as they will need to undergo much more painstaking scrutiny in order to discover the fraudulent ones. 

Scams, fuelled through social media include fake businesses being invented, fraudulent ABN applications being lodged and fake BAS documents being submitted to obtain a GST return. The ATO has already stopped $770 million in payments of this nature being issued. 

The businesses that will suffer are those that sell predominantly GST-free products and claim back GST credits on supplies in order to keep their business ticking over. Businesses that purchase a large capital outlay will also be held up, as will new start-ups and those who are faced with an irregular, yet legitimate situation that places them in a GST refund scenario. 

By discussing your situation with your financial advisor here at YBM, we are able to together identify your financial wellbeing and whether or not getting caught up in lengthy delays is going to put your business under undue stress. 

Should the latter be the case, we may be able to step in to validate returns with the ATO on your behalf to speed up the process or take proactive measures with the knowledge that these lengthier procedures are now a reality.

 

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