A scam promoted on TikTok has led to at least $1.2 billion dollars in payouts for what is being dubbed the biggest tax fraud in Australian history.

The Australian Taxation Office (ATO) admitted the colossal payouts as part of a widespread scam promoted on social media.

Despite its enormous yield, the scam simply operated by using fictitious business activity statements to garner GST claims.

Scammers would acquire an Australian Business Number and register entirely fabricated businesses via their MyGov account.

From there, they would submit Business Activity Statements – typically claiming to have spent exorbitant amounts setting up their “business” – and apply for a 10 per cent GST refund from the tax office.

“The fraud involves offenders inventing fake businesses and Australian business number (ABN) applications, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund,” said ATO Deputy Commissioner John Ford.

While the scam was initially detected by Australian banks such as Westpac back in 2020, it ballooned in mid-2021 after influencers on social media platform TikTok began making videos to proliferate the fraud.

As reported by the Australian Financial Review, the viral scam saw thousands of people making false claims for refunds each day, with the tax office reporting an average amount claimed of $20,000 in May 2022.

Harkening back to the early days of online arbitrage scams, many participants of the scam followed the advice of TikTok influencers and viewed the scheme as a “money hack”, a mere trick to earn easy money.

A large majority of TikToker users are reportedly between the ages of 18 and 34 – with one in four users being under 20 years old.

“I thought this was fairly self-explanatory, but GST fraud is illegal regardless of what people say on TikTok,” TikTok creator Jitsycat told his viewers.

“This is not a money hack. This is tax fraud,” he added.

In spite of this scam finding a home among TikTok’s userbase, videos encouraging GST fraud can still be searched on the app with ease.

TikTok did not respond to Information Age’s request for comment.

Operation Protego: ATO raids hit scammers

The ATO first became aware of the scam in late 2021 due to an increase in referrals from banks and “took immediate action” after the situation “escalated” in early 2022.

An investigation into the major GST fraud was launched In April 2022 under the name Operation Protego.

Shortly after, the ATO-led Serious Financial Crime Taskforce began executing raids across the country.

“We have prioritised and taken compliance action against more than 56,000 perpetrators,” said the ATO.

A collaboration between the Serious Financial Crime Taskforce and law enforcement agencies has seen more than 100 suspected perpetrators arrested, including members of outlaw motorcycle gangs and organised criminal organisations.

Additionally, more than 10 people have been convicted for their involvement in the illicit activity.

“GST fraud is a serious offence. Criminals use the profits they receive to fund further illegal activities,” said Ford.

“We know who has committed the fraud, and we’re only one step away from knocking on the next door.”

While the tax office is facing ample criticism from the Australian public for its arguably sluggish response to the scam – what it admits is the “biggest GST fraud in Australia’s history” – the ATO suggests the threat is now contained.

“We have stopped $2.7 billion being paid to fraudsters. We continue to pursue those who have committed this fraud and collect debts which attract penalties and interest,” it said.

“This was an unprecedented threat proliferated via social media and is now contained.”