A scheme allowing travellers to claim back GST when they leave Australia has been widely rorted, audit office finds

This article is more than 1 year old

This article is more than 1 year old

Australians rorting a scheme designed to allow travellers to claim back the goods and services tax have cost the budget up to $557m over 20 years, according to the audit office.

In a scathing audit report released on Monday, the home affairs department and tax office were blamed for failing to undertake risk assessments and implementing only “limited systems” to prevent revenue leakage.

Both government agencies conceded that the tourist refund scheme (TRS) – which gives travellers refunds for GST and wine equalisation tax – is a “low priority”, with the ATO even suggesting it may not be practical to enforce.

According to data estimates provided by home affairs, the scheme suffered “a large level of non-compliance from Australian citizens and residents and significant revenue leakage” of between $244m and $557m since July 2000.

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While around 60% of countries have schemes that provide sales tax refunds to tourists, the ATO believes Australia is the only country that allows its own citizens and residents to participate in the scheme – opening the system to abuse from those who claim they are taking goods out of the country but then bring them back after international travel.

The audit office found that IT systems used to identify non-compliant or fraudulent claims had not improved “in any meaningful respect” since the scheme’s introduction almost 20 years ago.

“Home Affairs and the ATO have not used the available TRS data to implement systematic and routine compliance approaches to assist in detecting patterns and indicators of revenue leakage,” it said.

“Detections of significant instances of fraud have been ad hoc rather than as a result of systematic data analysis.”

The audit office found that the home affairs department used its power to place alerts on returning Australian citizens and residents where it suspected that goods may be reimported without being declared “relatively infrequently”, despite a hit rate of 41.9% where such red flags were placed on a traveller.

The department also stopped issuing penalties for undeclared importation of TRS-claimed goods between 2013 and 2018, issuing them “infrequently” since then.

In 2012 an enforcement exercise found that 36% of returned Australians who had made a claim were non-compliant, a figure that would suggest a loss of $244m of GST revenue that would otherwise be paid to the states.

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In 2015 the department suggested a more recent audit put the rate at 50% non-compliance, while documents from 2018 suggested in a 2014 audit the rate was 82%, which implies revenue of $557m was lost since the scheme’s introduction in 2000.

However, the audit report said the department and ATO were “unable to locate data sources for the two more recent estimates of non-compliance”.

The ATO responded that the audit office had “relied on unverified Department of Home Affairs’ non-compliance rates to calculate revenue leakage.

“We also observe that it would appear to be impractical to enforce the TRS at airports to reduce the ANAO’s currently stated revenue leakage.

“Whilst this is a matter for the Department of Home Affairs to consider, the ATO believes that any compliance strategy under the current TRS framework will have a negative impact on international passenger experience.”

The home affairs department responded that it considers the TRS of “relatively low risk and operational priority compared with our other responsibilities such as national security, border protection and immigration policy”.

It blamed the funding of enforcement which it said had “not kept pace with the escalating number of claims made each year. We raised this on a number of occasions over the past five years noting that the number of TRS claims has almost doubled whilst the funding provided by the [ATO] has slightly fallen.”