The Tax Office believes it may have finally stopped a GST rort involving the gold industry that has cost more than $700 million in lost tax and revenue.
The scam, which has been running for at least five years, has seen dodgy gold traders, refiners and organised criminal syndicates pocket the GST or claim fraudulent tax rebates on billion of dollars' worth of gold sales.
In 2013, the ATO estimated the scheme had cost taxpayers $65 million, which was revised up to $550 million in losses by July 2016.
That figure is now $700 million, according to testimony by senior ATO officials before a Senate estimates committee hearing on Wednesday.
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"We're talking about $600 million, $700 million, perhaps a billion dollars, laundered that should have been going to the states to run their schools, hospitals, etc. That's where the GST goes," Senator John Williams said.
ATO deputy commissioner Timothy Dyce said: "Senator, it's a large amount of money and we're working very hard to recoup as much of that as we possibly can."
The scam exploits a discrepancy in the way the GST applies to "scrap gold" versus gold bullion, which does not attract the 10 per cent tax.
In 2011, a number of gold industry "syndicates" began forming to trade on this discrepancy, smashing or melting down bullion to make it eligible for GST when it was sold on to precious metals dealers and jewellers.
The GST could be pocketed by the seller, while the buyer could claim a GST credit from the government. It is believed the same gold was passed around and around among the syndicates in what was called a "carousel" arrangement.
Fairfax Media understands a number of powerful criminal groups have been underwriting and profiting from the scam, including outlaw motorcycle clubs and organised crime gangs.
Senator Williams cited figures showing that turnover in the Australian scrap gold market had grown from $150 million in 2011 to $1.8 billion in $2016.
The ATO and Australian Federal Police launched Operation Nosean in 2012 to contend with the problem, but despite staging raids and issuing massive tax bills to numerous entities believed to be involved, the scam continued to grow.
Those involved claimed that they had done nothing illegal – they said they were either unaware the gold bullion had been purposefully altered or that the act was not illegal.
ATO second commissioner Neil Olesen testified at the hearing that the Tax Office believed it now had "a grip on the issue".
"We've introduced a voluntary reverse-charge mechanism and released a new tax determination on second-hand goods [scrap gold] that seems to be reverting refund arrangements in relation to the gold industry back to the kinds of levels that we've seen earlier, rather than in this most recent period," he said.
Senator Williams said: "Since you've withheld the GST there has been a significant drop again. It clearly shows the scheme, doesn't it?"
The ATO said it had referred one brief of evidence to the Commonwealth Director of Public Prosecutions, while another eight were under consideration for referral. Another referral had been accepted by the Serious Financial Crimes Taskforce involving three syndicates, a refiner and a gold bullion dealer.
cvedelago@theage.com.au