GST fraud case study

In one of the ATO’s longest tax fraud investigations, a man has been sentenced to 10 years imprisonment with a non-parole period of 6 years and 8 months, for his involvement in a sophisticated GST fraud scheme.

Person A, a key figure in Group X, which developed high profile properties in the Hunter Valley and Sydney regions, was convicted of conspiring to lodge fraudulent business activity statements, intending to cause a loss to the Commonwealth of $15 million.


The scheme

The intricate scheme orchestrated by Person A spanned several years, from February 2004 to June 2007, and involved establishing three tiers of companies:

  • Tier 1 – developer
  • Tier 2 – building companies
  • Tier 3 – suppliers

The scheme was conducted in four stages:

Stage 1

The Tier 1 developer contracted the Tier 2 building companies to construct a development, such as a hotel and golf course.

Stage 2

The Tier 2 building companies obtained supplies or labour from the small (shell) Tier 3 suppliers, such as a bricklayer.

Stage 3

The developer claimed they paid GST to the building companies and the building companies claimed they paid GST to the suppliers – GST skimming. Grossly inflated construction costs and purchases of goods between the companies that never actually occurred were also recorded to claim additional GST.

Stage 4

Person A conspired with the intention to cause loss to the Commonwealth of $15 million by fraudulently obtaining GST refunds.


The investigation and extradition

Operation 4, an ATO investigation, was commenced in 2008 after five years of audit activity. During the investigation, multiple search warrants were executed. Person A fled Australia shortly after, eventually relocating to New Zealand.

Person A’s conviction for two counts of conspiracy to defraud the Commonwealth followed his extradition from New Zealand to Australia, undertaken with assistance from the Australian Federal Police and the Commonwealth Director of Public Prosecutions.

ATO Assistant Commissioner Jade Hawkins said that the sentencing of Person A “shows that no matter where you are, we will find you and hold you accountable for your actions.”


Key takeaways

The sentencing of Person A to 10 years in prison for his involvement in a sophisticated GST fraud scheme marks a significant outcome in one of the ATO’s longest tax fraud investigations. The collaborative efforts of law enforcement agencies to extradite the man from New Zealand to Australia illustrates that those engaging in serious tax fraud cannot evade prosecution simply by crossing borders.

Nyman Gibson Miralis provides expert advice and representation in cases of alleged tax fraud and financial crime, including where extradition is involved.

Contact us if you require assistance.