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ATO Mongrel Bunch of Bastards Continues—Morrison Needs to Act

Tuesday, April 06, 2021

Today we release details of continuing abuse of small business by the ATO.

You may remember that in 2018 we were heavily involved in the production of the ABC 4 Corners program Mongrel Bunch of Bastards. The program exposed the gross abuse of small business people by the ATO. Since then we have campaigned hard for reform to the ATO’s audit and enforcement division, which is where the problems exist.

This time, in our view, the abuse looks like a massive ATO cover-up of the largest tax scandal in Australia’s history. Surely not, we ask?

As background, between around 2012 and 2015, international criminals defrauded an estimated $2.45 billion from the ATO through a GST scam involving gold trading. Adding to the scandal is that the scam was well known to the ATO from around 2003. The way to stop the scamming was well known, but the ATO did nothing until it was too late.

In our view and on the evidence, after allowing the scam to occur and after the criminals have disappeared, the ATO is seeking to cover up its huge incompetence or worse. It is doing this by attacking innocent small business people to deflect attention from its own serious shortcomings. This is our assessment. However, an official government report into the ATO’s treatment of small business on this issue is scathing of the ATO.

The report from the ATO watchdog, The Inspector General of Taxation Ombudsman (IGTO), looks at the case of small business owners Lynn and Jerry Reid who run a small gold refinery on the Gold Coast. The ATO has withheld $1.3 million of GST refunds from Lynn and Jerry that is due to them. But get this. Even though Lynn and Jerry don’t owe the ATO any money, the ATO has ‘invented’ a technical ‘tax penalty’ and now say that Lynn and Jerry owe the ATO $173,107. We say it’s a total fabrication. The ATO could pull this sort of stunt on anyone.

The IGTO report says that the ATO has no evidence to justify its raiding of Lynn and Jerry’s bank accounts to collect the $173,107. The ATO has not accused Lynn and Jerry of criminal activity or of doing anything wrong. The IGTO says that the ATO must:
  • Issue an apology to Lynn and Jerry.
  • Compensate Lynn and Jerry for harm done to them.
It’s an appalling story of abuse which we’ve detailed in our summary/commentary. Here is the IGTO 77-page report.

Lynn and Jerry are just two more victims of an abusive, dysfunctional ATO audit and enforcement division. This sort of ATO abuse must be made to stop. We call on the Morrison government to recognise that it has a serious problem with the ATO and to urgently undertake ATO reform.

We have studied the USA reforms to its tax authority—the IRS—and submitted a report to parliament. The US model provides a valuable, proven template for Australia.

Frankly, enough is enough. Reform action is needed now. Continuing abuse of small business people like Lynn and Jerry must stop. The Morrison government cannot sit back and continue to watch this destruction of small businesses.


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