It took seven years of expensive, drawn-out legal battles, but one of the oldest and biggest private precious metals companies in Australia closed a dark chapter in the gold refining industry with a recent win against the Australian Tax Office in the Administrative Appeals Tribunal (ATT).
That tumultuous period included police raids, garnishee notices, tax assessments and a string of company collapses as the ATO tried to stop a GST scam that had run rampant in the gold industry and involved an estimated $1 billion, criminal gangs and links to terrorism.
It comes as the government announced a new Commissioner of Taxation, Rob Heferen, a career public servant, who will replace Chris Jordan, who spent much of his working life in the private sector, including more than 25 years at big accounting firm KPMG, before taking the top job a decade ago.
Heferen will face a series of challenges when he steps into the role in March, including the fallout of the gold scandal and the trial of ATO whistleblower Richard Boyle, who was raided and charged with criminal offences after blowing the whistle on what he saw as heavy-handed debt-collection practices in the Adelaide branch of the ATO.
In the case of the gold industry, the judgement handed down by the AAT on November 30 and made public more recently was claimed as a victory for the industry by Pallion Group, which bankrolled the legal action.
The outgoing taxation commissioner Chris Jordan.(ABC News: Mark Moore)
How the scam worked
The saga began a decade ago with revelations that the gold refining sector was the target of an international GST rort involving dodgy gold traders and organised criminal syndicates that exploited loopholes in our GST laws.
Gold refiners buy objects that consist of gold for the purpose of extracting the gold to create a final product, usually bullion.
The GST scam was simple. Under the GST Act, investment-grade gold bullion, or gold stamped into bars and coins, is classified as currency and therefore exempt from GST. Scrap gold, or gold that has been defaced, damaged or came from jewellery then sold to refiners, attracts GST.
Criminals bought GST-free bullion, defaced it, then on-sold it to refiners as scrap, attracting GST which they collected. They should have remitted the GST to the ATO but they pocketed it and disappeared. The refiners, who bought the scrap, claimed back the GST in the business activity statement (BAS) and were paid by the ATO, which is legal.
But what was happening in Australia from about 2010 is that the same gold started going around and around, recycled from bullion to scrap, to bullion again, and each time the crooks collected 10 per cent GST that wasn’t remitted to the ATO and the refiners claimed the GST from the ATO.
It was a fraud, pure and simple. The surge in gold refining activity from 2010 led the ATO to believe that some refiners were part of the GST scam, which they described in court documents as a gold tax carousel fraud arrangement “aimed at manipulating the GST treatment of gold”.
To this end, the ATO issued retrospective assessments for GST to most of the refining industry.
An industry under pressure
Hundreds of millions of dollars of assessments were made, plus penalties, which crippled the industry, with many members claiming they were innocent.
Most didn’t have the funds to challenge the ATO, but the Pallion Group did.