VIDEO: No Return: Australia's Missing Billions

'NO RETURN'

28 July 2025

Four Corners

SENATOR BABARA POCOCK, AUSTRALIAN GREENS: Our tax system is a cornerstone of our society. If we don't have confidence in those who take our money for tax, then we're really in trouble as a country.

ANGUS GRIGG, REPORTER: The Tax Office is one of the biggest government agencies in Australia. It's also one of the most secretive.

SENATOR BABARA POCOCK, AUSTRALIAN GREENS: There's a lot that happens behind the closed door of the ATO that isn't open to scrutiny for us as average citizens and taxpayers.

ANGUS GRIGG, REPORTER: For this episode of Four Corners, I've teamed up with my former colleague from the Australian Financial Review, Neil Chenoweth. He's been tracking the ATO for more than 20 years and the critical flaws in its systems.

NEIL CHENOWETH, REPORTER: If you wanted to design a system that was going to be open to fraud, this is the one that you would choose. It's big money fast.

ANGUS GRIGG, REPORTER: Together, we expose how more than 50 billion dollars of taxes have gone missing.

ANGUS GRIGG, REPORTER: That's a big number though…

KAREN PAYNE, INSPECTOR GENERAL TAXATION (2019-24): It's a big number. It's confusing. And something I personally would like to know the answer to.

ANGUS GRIGG, REPORTER: And how the agency set up to protect our money is failing… leaving it open to exploitation.

ALI CUPPER, DEPUTY MAYOR, MILDURA: How an organisation as powerful and as well funded and well- resourced as the ATO, can drop the ball so badly, blows my mind.

ANGUS GRIGG, REPORTER: From small-time fraudsters…

'SARAH': Almost was like winning the lottery, but then you kind of know that it's not your money.

ANGUS GRIGG, REPORTER: …To industrial-scale scammers.

STEPHEN HATHWAY, LIQUIDATOR: It's almost whack-a-mole. You think you've got one and he's off perpetrating it again.

ANGUS GRIGG, REPORTER: We ask why the tax office doesn't act, even after repeated warnings.

ANGUS GRIGG, REPORTER: That is a huge statement that their fraud detection processes were really no better than random selection…

ALI NOROOZI, INSPECTOR GENERAL TAXATION (2008-18): They have certainly been on notice.

ANGUS GRIGG, REPORTER: We also reveal how the tax office deals with the rich and powerful compared to everyday Australians…

ANGUS GRIGG, REPORTER: So, in a 10-day period the ATO went from demanding almost a million dollars, to saying you know what, don't worry about that.

NEIL CHENOWETH, REPORTER: … It does raise some questions about the ATO.

ANGUS GRIGG, REPORTER: As well as the former Tax Commissioner's historical links to a tax haven.

STEPHEN MAYNE, SHAREHOLDER ACTIVIST: Surely the checks before such an appointment would say, have you ever been involved in using secrecy jurisdictions?

ANGUS GRIGG, REPORTER: With scandals piling up, we uncover how the ATO's failures are costing you.

TITLE CARD: NO RETURN

NEWSREADER UPSOT: The Australian Taxation Office is under scrutiny for paying out… fake GST claims to scammers

ANGUS GRIGG, REPORTER: Our story begins in Mildura … a river town in north-west Victoria.

STEPHEN JONES, ASST TREASURER UPSOT: Somewhere in the vicinity of… $1.7 billion dollars has been lost to revenue as a result of this fraud.

ANGUS GRIGG, REPORTER: It's an unlikely setting for the biggest GST tax scam in Australian history.

ANGUS GRIGG, REPORTER USPOT: Not too far away now. It's been a fair old drive right, pretty isolated.

NEIL CHENOWETH, REPORTER USPOT: I still can't really get my head around it being one of the hotspots for this huge, huge fraud. Mildura is not the first place that comes to mind.

ANGUS GRIGG, REPORTER: The Tax Office said this was a shocking fraud, perpetrated by individuals… then turbocharged on social media.

NEWSREADER UPSOT: The ATO is blaming influencers on TikTok for promoting the scam…the tax fraud went viral in 2021.

ANGUS GRIGG, REPORTER: Once discovered the ATO claimed to have cracked down hard… and quickly brought the scam under control.

NEWSREADER UPSOT: Operation Protego was launched. That led to a series of raids… and that threat has now been contained.

ANGUS GRIGG, REPORTER: Some 57,000 people took part in the fraud… and it found willing participants in this irrigation town on the Murray.

ALI CUPPER, DEPUTY MAYOR, MILDURA: Mildura as a town is a beautiful place. Uh, it's, it's a place of contrast. We farmed a desert and turned it into a multi-billion-dollar economic powerhouse.

ANGUS GRIGG, REPORTER: Ali Cupper is the town's deputy mayor, a lawyer, social worker and former member of Victoria's parliament.

ALI CUPPER UPSOT: Victoria is a fairly small state.

ALI CUPPER, DEPUTY MAYOR, MILDURA: At the same time, we are very isolated. Uh, and isolation invariably brings with it a whole set of disadvantages and challenges. Poverty and disadvantage are always gonna create fertile ground for participation in these sorts of things.

If there are people in Mildura who have done the wrong thing, those people deserve to be held accountable. I guess my unanswered question would be how did it happen?

ANGUS GRIGG, REPORTER: How did this GST scam actually work?

NEIL CHENOWETH, REPORTER: It just takes three steps. And the first step is that you have to come up with an imaginary business that you would like to run. So it might be a restaurant like this, it might be a hairdresser, it might be a dog grooming business. You then link this fictional business to an Australian business number and, uh, ABN.

NEIL CHENOWETH, REPORTER: Step two is you then go to the myGov site, access the ATO and, uh, link that ABN to the GST uh, system.

ANGUS GRIGG, REPORTER: So that's registering for GST, right?

NEIL CHENOWETH, REPORTER: Yep. From that point on, it's all easy.

ANGUS GRIGG, REPORTER: The third step is the really important one. This is how you get the money.

NEIL CHENOWETH, REPORTER: Absolutely. From that point on it's all easy.

ANGUS GRIGG, REPORTER: So the third step is the really important one, this is how you get the money.

NEIL CHENOWETH, REPORTER: You can do the whole process just, just on your phone. It'll take about 120 seconds —

ANGUS GRIGG, REPORTER: — Two minutes.

NEIL CHENOWETH, REPORTER: Two minutes, and you're there. So there are just three key numbers that you have to get right. And the first number is, how much sales have you had? Um, the second number is how much GST have you collected for the ATO? The third number is, the really important one is how much does the ATO owe you? Well look, it's, it's cost me 200 grand to, uh, set up my, uh, business here my restaurant or my dog grooming business, so I paid about $19,000 GST there so can I have that all back please. And it was an entirely automated process, there's no need for an invoice, no need for receipts at this point.

ANGUS GRIGG, REPORTER: So just so I'm clear here, you set up a fake business, you then register an ABN, and then you claim a huge amount of fictitious costs for this business. And then within a couple of days, a couple of working days, the ATO gives you back a huge sum of money as a GST refund into your bank account. Just like that. No verification needed, no documents at all.

NEIL CHENOWETH, REPORTER: If you wanted to design a system that was going to be open to fraud, this is the one that you would choose. It's big money, fast.

'SARAH': The people that I was associating with at that time, um, they had done it and told me how easy it was to get a large amount of money quickly. Um, and I just thought at the time it was a good idea 'cause I was in a bit of financial trouble.

ANGUS GRIGG, REPORTER: This single mother has asked not to be identified … we'll call her 'Sarah'. She didn't hear about the scam on TikTok, but through a friend, who offered to do it for her.

ANGUS GRIGG, REPORTER: And how much did you say you paid the person each time?

'SARAH': Uh, about $1,500 each time. I think it was within two weeks that I had the money in my account.

ANGUS GRIGG, REPORTER: Claiming to be a hairdresser, Sarah received almost $35,000 in GST refunds from the tax office over two payments.

ANGUS GRIGG, REPORTER: Have you ever worked as a hairdresser previously?

'SARAH': Uh, no.

ANGUS GRIGG, REPORTER: Sorry let me put it this way. Was there any checking done to see if you had established a hairdressing salon?

'SARAH': No. None. None whatsoever. I don't even really still understand how it went through. I was a single parent and then all of a sudden I'm a hairdresser that's getting this return put into my account. No other payments from clients or anything like that to balance it was needed, like no proof.

ANGUS GRIGG, REPORTER: To get a GST refund of $35,000 Sarah would have needed to incur around $350,000 in costs at her fictitious hairdressing business. For someone living week to week on welfare … this should have been a red flag for the tax office.

'SARAH': They just, they asked for the amount that I had spent, I think on, on purchasing like supplies but no receipt. They just needed a number, but nothing legit or hard copy or anything like that. No.

ANGUS GRIGG, REPORTER: Did it surprise you how easy it was?

'SARAH': Yeah, I just couldn't believe it that it was just sitting there on my everyday access debit bank card.

ANGUS GRIGG, REPORTER: The same bank account that your welfare payments and family tax benefit was going into.

'SARAH': Yeah.

ANGUS GRIGG, REPORTER: 'Sarah' was arrested in December 2022, pleaded guilty and received a two-year good behaviour bond. With interest and penalties her bill is now up to $45,000 and growing.

ANGUS GRIGG, REPORTER: What prospect do you think of you have of repaying that?

SARAH: I can't pay it back. That's not even an option at the moment or it probably never will be.

ANGUS GRIGG, REPORTER: Should we go over here…

ANGUS GRIGG, REPORTER: Peter Delorenzo is a criminal lawyer. He represented a handful of those prosecuted for the GST scam in Mildura.

ANGUS GRIGG, REPORTER: And just tell us again, what type of person, uh, typically was involved in this scam in your experience?

PETER DELORENZO, CRIMINAL LAWYER: Some of them already had, uh, prior criminal history. Uh, some of them were, a lot of them were on Centrelink, uh, and, and weren't, were not working at the time. Some of them I, I understand, would not have known what GST was.

ANGUS GRIGG, REPORTER: Do you think the clients that you had, the majority of them will ever pay that money back?

PETER DELORENZO, CRIMINAL LAWYER: If they're on Centrelink and they've got large tax debts, uh, and they're not working, they, the chances of them paying back large amounts are very low.

ANGUS GRIGG, REPORTER: How did your clients hear about it?

PETER DELORENZO, CRIMINAL LAWYER: Some of them also did say they, they heard about it just from, uh, a client to a client.

ANGUS GRIGG, REPORTER: So what really happened here in Mildura… the ATO says it identified this scam with sophisticated risk models, artificial intelligence, and tip-offs from the major banks. These documents tell a very different story… the story of a Mildura local convicted in Victoria's County Court… and how police here only happened upon the scam when they picked him up on an unrelated gun charge.

NEIL CHENOWETH, REPORTER: So Angus, how did you go in the court?

ANGUS GRIGG, REPORTER: Yeah, pretty well actually. Look what the documents show is the Mildura police pick up this guy called Linden Phillips and they very quickly find evidence of a GST scam having searched his phone. So that's the sort of jumping off point here. So in August 2021, Linden Phillips gets out of gaol, having spent years inside. Once out, he very quickly gets himself organised to be able to claim GST refunds from the ATO. And he does this through a fictitious earth moving business this time.

NEIL CHENOWETH, REPORTER: Ok. So what's his first claim?

ANGUS GRIGG, REPORTER: My reading of it is that he does basically a trial run. So he claims $13,158 in GST refunds from the ATO. And the crazy thing is, within three days, the ATO pays him, right.

NEIL CHENOWETH, REPORTER: Well, that's not bad.

ANGUS GRIGG, REPORTER: Yeah, it's pretty quick, isn't it? So no checks, no verification required for a guy that's just got straight out of gaol.

NEIL CHENOWETH, REPORTER: Whoa. What's his next step?

ANGUS GRIGG, REPORTER: A couple of weeks after that, he goes for the absolute mother lode. He goes for the big one. So what he does is he lodges 46 BAS statements and he backdates these to about January 2018. Most of that time he's actually in gaol and what he claims is he claims $821,000 in GST refunds from the ATO.

NEIL CHENOWETH, REPORTER: Wow, so hold on, just looking at that kind of number — 800 grand — to get that much you'd have to claim costs what something like close to 10 million bucks of costs that he claims to have spent while he's behind bars.

ANGUS GRIGG, REPORTER: Yeah, exactly. He buys himself a second-hand Porsche and he buys a house for his mother.

NEIL CHENOWETH, REPORTER: You'd have thought all of that back dating would be some kind of red, red flag. How long did it take for the ATO to think something's not quite right here?

ANGUS GRIGG, REPORTER: So the really damning thing is that the ATO very quickly realise that something's , not right here. And they start emailing him, they start writing him letters, and he just fobs them off. And he manages to do this for about 4 months.

NEIL CHENOWETH, REPORTER: So how did he get caught?

ANGUS GRIGG, REPORTER: Yeah they pick him up by chance, actually it's the local police detective, Vanessa Power, who actually wins a medal for her work. She goes to his house on an unrelated drug matter, searches his phone, finds evidence of this GST scam and that actually leads them to 60 other offenders in this Mildura area. But the really key thing is here is this delay of four months. That is a crucial period where this GST scam is just exploding across the country.

ANGUS GRIGG, REPORTER: Around the time Phillips was arrested in April 2022, the ATO launched Operation Protego. It would find that 57,000 people were in on this scam… but so far only 122 have been convicted… many of them from Mildura.

ALI CUPPER, DEPUTY MAYOR, MILDURA: So Mildura was not a centre for offending. It was not an epicentre of offending in terms of this ATO tax scam. It was actually an epicentre for prosecutions.

ANGUS GRIGG, REPORTER: And of the $2 billion stolen from taxpayers… only around 8 per cent or $160 million has so far been recovered.

ALI CUPPER, DEPUTY MAYOR, MILDURA: The ATO not only dropped the ball in relation to creating this massive loophole that you could drive a truck through, but also dropped the ball in terms of then being able to follow up, uh, and prosecute the people, um, who were scamming the system.

ANGUS GRIGG, REPORTER: These scams continue to evolve… the latest being stealing someone's identity to commit tax fraud. The ATO says it's tightened up its systems, but you still don't need any verification to get a GST refund.

ANGUS GRIGG, REPORTER: Three years before the scam took off … the Tax Office had been put on notice about GST fraud.

ALI NOROOZI, INSPECTOR GENERAL OF TAXATION (2008-18): I was the Inspector of General Taxation for 10 years from 2008 to 2018. The job was to investigate systemic issues in tax administration, conduct reviews and make recommendations for improvements.

ANGUS GRIGG, REPORTER: While overseeing the tax office, one of Ali Noroozi's final acts was to explicitly warn the ATO's fraud detection systems were not up to scratch.

ALI NOROOZI, INSPECTOR GENERAL OF TAXATION (2008-18): The ATO, they don't have endless amount of resources to audit every individual taxpayer. The way they direct their resources is by assessing risk. So what they do is try to identify the highest risk areas and apply their resources accordingly.

ANGUS GRIGG, REPORTER: The problem was … the ATO was failing to identify these risks.

ALI NOROOZI, INSPECTOR GENERAL OF TAXATION (2008-18): Certain aspects of the automated risk assessment tools were only yielding strike rates that were only marginally better than a random selection would provide.

ANGUS GRIGG, REPORTER: That is a huge statement that their fraud detection processes were really no better than random selection.

ALI NOROOZI, INSPECTOR GENERAL OF TAXATION (2008-18): They have certainly been on notice that their risk assessment tools could do better.

ANGUS GRIGG, REPORTER: Not only did the ATO fail to heed this warning, just two months before the GST scam blew up in mid-2021 it downgraded the fraud risk from "severe" to "low". It said the likelihood of this risk had gone from "almost certain" to "rare".

ANGUS GRIGG, REPORTER: So you warned of this 10 years earlier. they clearly didn't act on it.

ALI NOROOZI, INSPECTOR GENERAL OF TAXATION (2008-18): Given any kind of fraud really you need to take it seriously. You need to act on those early warning signs. And as I say, if there is any substance to them, then you need to move at speed and at scale to try to stem the flow.

ANGUS GRIGG, REPORTER: From what you've read, did the ATO do that?

ALI NOROOZI, INSPECTOR GENERAL OF TAXATION (2008-18): Well, it seems to me as if they could have acted earlier and they probably, you know, could have taken stronger action earlier.

ANGUS GRIGG, REPORTER: The ATO said it had strengthened its controls and "evidence of a business" is now required before an ABN is issued. It said new "sophisticated GST risk models" had been significantly upgraded. And that fraudsters "should be on notice".

ANGUS GRIGG, REPORTER: While the ATO claimed victory over the small players… it was fighting a losing battle with the big end of town. And these fraudsters aren't claiming tens of thousands of dollars in GST refunds… they're claiming tens of millions. Every year sophisticated corporate scams like these cost you — the taxpayer — 1.4 billion dollars.

ANGUS GRIGG, REPORTER: We're on the way to see Stephen Hathway… a liquidator who's been funded by the ATO to chase a wave of GST frauds.

STEPHEN HATHWAY, LIQUIDATOR: Frauds will flourish if if they believe that nobody's going to catch them. This one guy's just so damn persistent.

ANGUS GRIGG, REPORTER: His target is Nahi Gazal, who claimed to be a wealthy Sydney property developer. Gazal was already in the sights of the ATO over a construction scam. It used fake invoices to claim GST refunds for building projects which either didn't exist… or had been completed by other developers.

STEPHEN HATHWAY, LIQUIDATOR: It never had any legitimacy. There's nothing in it that ever demonstrates any act of commerce or enterprise. It didn't create anything. It didn't manufacture anything, it didn't even provide anyone a service. The whole set of transactions completely and utterly made up, fraudulent have no basis.

ANGUS GRIGG, REPORTER: Despite this, Gazal and his associates are alleged to have squeezed more than 21 million dollars out of the tax office in GST-refunds. By September 2023 the ATO had issued Gazal with a $44 million tax bill — including penalty interest.

STEPHEN HATHWAY, LIQUIDATOR: Once the money is released by the ATO into this sort of deception, it's very difficult to get back.

ANGUS GRIGG, REPORTER: Now, we can reveal, while the ATO was chasing him for that money… it failed to detect he was using a new string of companies… to continue scamming the tax office.

STEPHEN HATHWAY, LIQUIDATOR: It's almost whack-a-mole. You think you've got one and he's off perpetrating it again. Our investigation started and it unravelled into a larger and larger GST fraud. He's been the mastermind behind the creation, the maintenance of it and the milking of it.

ANGUS GRIGG, REPORTER: Using fake directors… its alleged Gazal set up new companies with the help of relative strangers… while ultimately controlling the money.

STEPHEN HATHWAY, LIQUIDATOR: So in this particular fraud, we've got taxi drivers, we've got young mechanics in their mid 20s. It's sometimes difficult until after the event when you see the bank statements and see where the money's moving that these things can get exposed.

ANGUS GRIGG, REPORTER: Stephen Hathway has connected Gazal to an additional 22 companies which he says fraudulently claimed another $25 million dollars in GST refunds. Once again, Gazal was pretending to be a property developer.

STEPHEN HATHWAY, LIQUIDATOR: It was not a building enterprise. Not one bag of nails was bought from Bunnings. There was no items ever spent on any building material.

ANGUS GRIGG, REPORTER: And the tax office failed to carry out even the most basic checks.

STEPHEN HATHWAY, LIQUIDATOR: He claimed to be developing two buildings out in Liverpool and Blacktown. The whole thing was a complete and utter fabrication, a complete fraud from the beginning to the end.

STEPHEN HATHWAY, LIQUIDATOR: Nobody stops and thinks, well, what's the address of these buildings? Vaguely put a building in Liverpool. Vaguely put a building in Bankstown.

ANGUS GRIGG, REPORTER: Does anyone ask for Land title documents, Development applications?

STEPHEN HATHWAY, LIQUIDATOR : I'm the liquidator after the event. And then when we're looking into the file and we find nothing, there's no, there's no local council applications.

ANGUS GRIGG, REPORTER: And how much is the ATO likely to get back? Once again almost nothing.

STEPHEN HATHWAY, LIQUIDATOR: A lot of it's spent. A lot of it just gets consumed. You know, you, you, you burn it through travel and you burn it by buying Gucci or Chanel bags for the girlfriends. You never get that back.

ANGUS GRIGG, REPORTER: But is there anything to stop it happening again?

STEPHEN HATHWAY, LIQUIDATOR: No

CROWD CHANTING: Tony, Tony, Tony

ANGUS GRIGG, REPORTER: The ATO was already having problems verifying GST claims when the Abbott Government swept to power. It then swung the axe across the public service with the tax office amongst the hardest hit.

TONY ABBOTT: Because we are serious about reducing the regulatory burden on Australian businesses… We are also serious about a smaller bureaucracy.

ANGUS GRIGG, REPORTER: Over six years those cuts saw one thousand people — half the staff in the division responsible for GST — lose their jobs.

STEPHEN HATHWAY, LIQUIDATOR: I'm not sure that the ATO have ever recovered from that sort of drain of knowledge and drain of skill sets. The people are there work really hard and diligently, but there just needs to be more of them. And there needs to be more regard to to getting out there in the field and making those inquiries.

ANGUS GRIGG, REPORTER: The ATO says GST fraud is not widespread and the majority of businesses are doing the right thing. It says while there have been changes in staffing and business lines over time, the ATO continues to deliver robust compliance outcomes.

ANGUS GRIGG, REPORTER: These GST scams — big and small — are a major contributor to the ATO's missing billions. It's a number the tax office does not like to talk about.

ANGUS GRIGG, REPORTER: We're on our way to see Karen Payne, who took over as Inspector General of Taxation from Ali Noroozi.

NEIL CHENOWETH, REPORTER UPSOT: She's been warning about this for years. She's really across all of this stuff.

ANGUS GRIGG, REPORTER UPSOT: Okay. Well we are pulling in now.

ANGUS GRIGG, REPORTER: She's been raising concerns about collectable debt… which is undisputed money owed to the ATO … but money it has failed to collect.

KAREN PAYNE, INSPECTOR GENERAL TAXATION (2019-24): Most people should have their tax debts already paid before the tax debt is due. But when you look back through the ATO's annual reports, you could see these increasing levels of debt. So I think around the time we were looking, it was about $34 billion. I think it's now up around 50 billion.

ANGUS GRIGG, REPORTER: That number's now grown to 53 billion dollars. Money that could go towards hospitals, roads, and schools.

ANGUS GRIGG, REPORTER: Just to get this clear in my head, there's $50 billion of tax that hasn't been collected. That's a big number.

KAREN PAYNE, INSPECTOR GENERAL TAXATION (2019-24): It's a big number. And if you bring that number back into the revenue, then that means hopefully less taxes that everybody else has to pay. It's in all of our interests that the debts get collected.

ANGUS GRIGG, REPORTER: But the longer this debt is outstanding, the less chance we have of ever recovering it. The ATO's own data shows that once a debt is 12 months or older… then just 2 per cent of the outstanding amount is typically collected. As Inspector General in 2021, Karen Payne flagged collectable debt as a major problem.

KAREN PAYNE, INSPECTOR GENERAL TAXATION (2019-24): The large percentage of the debts that were due were in fact owned by a very small number of taxpayers, or they're related to a small number of taxpayer accounts. So you'd kind of think it's a small number of people you need to be chasing.

ANGUS GRIGG, REPORTER: Once again there is little indication the tax office took this advice.

KAREN PAYNE, INSPECTOR GENERAL TAXATION (2019-24): I think once they've locked into a particular view, it's very difficult to establish, even if you present the evidence to them and say, but here, look what I've found. Look at this. It's very difficult for them to see a different point of view.

ANGUS GRIGG, REPORTER: The ATO likes to blame this increase in uncollected tax on Covid — its own annual reports show the explosion began two years before the pandemic. Over the last six years this figure has more than doubled. And the biggest part of this increase … $21 billion comes from activity statements, which include the GST … an area rife with fraud.

KAREN PAYNE, INSPECTOR GENERAL TAXATION (2019-24): The fact that it keeps rising is troubling. So it's fundamental I think that we've got good administration, uh, of the tax system because the integrity of the tax system is fundamentally important to all of us. It pays for all of the services that we, um, benefit from.

ANGUS GRIGG, REPORTER: The tax office is given extraordinary discretion to discount or waive debts… Last year it made 301 confidential settlements, writing off 880 million dollars. Just how the ATO uses these powers to make settlements is never disclosed to the public or the parliament. But there is one settlement we can tell you about.

ANGUS GRIGG, REPORTER: You just never get to see behind the veil of tax secrecy, right?

NEIL CHENOWETH, REPORTER: You would never see the personal tax affairs of the PM.

ANGUS GRIGG, REPORTER: Although in this case there is a bit of history.

NEWSREADER UPSOT: (1986) Mr Keating was forced to admit to parliament that he failed to lodge last year's tax return until this week. 15 months too late.

ANGUS GRIGG, REPORTER: It was 1986 and Paul Keating was the federal treasurer … responsible for tax policy… when he failed to lodge his own tax return.

PAUL KEATING UPSOT: I fill my own returns in and that means I've got to run around and find the receipts and the bills and get the forms and do the rest and one tends to put it off, which is silly.

STEPHEN MAYNE, SHAREHOLDER ACTIVIST: It was a very ordinary look, but he was such a compelling reformer and personality that he was able to just ride through those sorts of controversies.

JOHN HOWARD UPSOT: How and by whom are your piggery companies being kept afloat?

ANGUS GRIGG, REPORTER: Controversy around Keating's tax affairs would follow him as Prime Minister and even after he left office.

In 1998 he was forced to justify the sale of his shares in two piggeries, including lawful attempts to reduce the amount of tax paid.

KERRY O'BRIEN UPSOT: You're accused today of minimising tax on the piggery deal when you sold your share.

PAUL KEATING UPSOT: Yeah, well, that's just, that is just completely wrong, Kerry. The commissioner is welcome to have a look at me any day of the week. My tax was lodged by KPMG. Journalists have been in touch with KPMG and they've told them that my tax affairs are completely A-OK.

STEPHEN MAYNE, SHAREHOLDER ACTIVIST: Well, Paul Keating was quite the entrepreneur. He's made 10s of millions of dollars. He took a lot of risks. He's had a wide portfolio of interests from, you know, lobbying in China, Wall Street investment banks, piggeries, listed technology companies, mobile companies, property plays.

ANGUS GRIGG, REPORTER: Keating's success in business brought with it renewed attention from the ATO. For the first time Four Corners takes you inside the private negotiations between the companies controlled by the former PM and the tax office.

We can reveal, one of his companies agreed to a settlement for tax liabilities of more than 3 million dollars, in 2010.

ANGUS GRIGG, REPORTER: What do we know about that Neil … how was it resolved?

NEIL CHENOWETH, REPORTER: Well at the time of the settlement there was a great deal of negotiation. And as part of that negotiation tax officers took Paul Keating through each of the companies and trusts that he had and he was able to assure them that they had all be settled, they were all tax paid.

ANGUS GRIGG, REPORTER: And was that the end of it?

NEIL CHENOWETH, REPORTER: Well no. Late 2012 the Tax Office was contacting him again, they wanted to talk to him about his sale of Lake Technology shares back in 2004.

ANGUS GRIGG, REPORTER: Lake Technology… a pioneer in headphone engineering, proved to be one of Keating's more successful investments. His company's initial $11,000 outlay grew to be worth more than $2 million, attracting a hefty tax bill when it sold the shares.

STEPHEN MAYNE, SHAREHOLDER ACTIVIST: Well, Paul Keating famously loved his classical music and the founder of Lake Technologies went to see him and with his headphones to show off the technology using the Dolby system of how you could listen to music and it would be beautiful using the technology that that Lake had. And Paul Keating was so impressed that he agreed to invest in the company before it floated.

ANGUS GRIGG, REPORTER: Four Corners has learnt in 2012 the ATO discovered Keating's company had not paid $446,000 in tax from the sale of the Lake Technology shares. In response it paid this tax, but it was seven years late and the ATO demanded penalties and interest.

NEIL CHENOWETH, REPORTER: He protested vigorously. He said this was an inadvertent mistake, an honest mistake, he really thought that the tax had been paid.

ANGUS GRIGG, REPORTER: It says here that it was a busy time for the former PM and the transaction had faded inadvertently from the consciousness of PJK — (Paul Keating).

ANGUS GRIGG, REPORTER: And how long did the dispute go on for?

NEIL CHENOWETH, REPORTER: Well the negotiation went back and forth for almost three years and then in April 2015 the Tax Office tried to I think draw a line in the sand and they issued a statement of demand that his company pay $953,000 which is what it had grown to in the meantime, immediately.

ANGUS GRIGG, REPORTER: So almost a million dollars in penalties and interest for failing to pay on time.

NEIL CHENOWETH, REPORTER: Yes, and it's at this point we know that Keating becomes directly involved in the negotiations.

ANGUS GRIGG, REPORTER: Yeah so the exchange continues and then suddenly the ATO's resistance melts. After three years of meeting and volumes of correspondence Keating's told in a four-line email that his debt has been wiped.

VOICE OVER: "Consequently, the balance of the account has been reduced to nil and the amount payable… is no longer owed."

NEIL CHENOWETH, REPORTER: And just like that, the debt becomes zero.

ANGUS GRIGG, REPORTER: So, in a 10-day period the ATO went from demanding almost a million dollars to saying you know what, don't worry about. Actually you don't need to pay that money anymore.

NEIL CHENOWETH, REPORTER: Yeah of course the thing to bear in mind is there's nothing wrong with asking the Tax Office to have a second look at your tax bill. You can't fault Keating for trying to have his tax bill brought down. It does raise some questions about the ATO though.

ANGUS GRIGG, REPORTER: For most taxpayers, formally challenging a ruling like this would require going to court. The ATO told us inadvertently overlooking payment was generally not grounds for cancelling interest and penalties, although it depended on individual circumstances. It said charges like these were designed to encourage the timely payment of tax, so those who paid late were not given an unfair advantage. Paul Keating declined to be interviewed and did not respond to a request for comment.

ANGUS GRIGG, REPORTER: Senator Barbara Pocock has been a staunch campaigner for tax office transparency. She's regularly clashed with the ATO over what she sees as its convenient use of secrecy provisions to shut down scrutiny.

SENATOR BABARA POCOCK, AUSTRALIAN GREENS: This goes to the question of fairness in our tax system. I don't know the detail of that example, but I think it's a failure of our system that such a, a, a significant change can occur without any public accountability, uh, in relation to, uh, that kind of change. And the average taxpayer who has no access to that kind of arrangement, I think would listen to the facts of that case and want to know, be assured that the right thing had been done here, the fair thing had been done.

ANGUS GRIGG, REPORTER: She has concerns around the use of confidential settlements.

SENATOR BABARA POCOCK, AUSTRALIAN GREENS: I certainly have questions in my mind about the fairness of the actual operation inside confidential settlements. They aren't on the public record. Um, and I think there needs to be more transparency about what's going on.

ANGUS GRIGG, REPORTER: It's hard to understand the tax office's failings today… without looking at the man who was in charge for 11 years. The architect of the modern ATO is Chris Jordan. Before he stepped down in 2024… he took a victory lap at the National Press Club.

CHRIS JORDAN, TAX COMMISSIONER, 2013-24: We've successfully charted a massive programme of transformation… We've cut red tape, and we've modernised our administration of the tax system as part of the digital revolution to make tax just happen.

ANGUS GRIGG, REPORTER: What Jordan didn't say was the flip side to this digital revolution was opening the door wider to fraud.

KAREN PAYNE, INSPECTOR GENERAL TAXATION (2019-2024): There's a tension if you are collecting revenue between wanting to make it very easy for a taxpayer. And on the other hand you've got responsibilities, uh, on behalf of all taxpayers and the government to ensure that you're managing risks. In my view, my personal view, is the tax office, we're leaning too much into let's make it easy for taxpayers to use the system.

ANGUS GRIGG, REPORTER: This push to make the system more user-friendly was Jordan's focus when he joined the tax office in 2013.

CHRIS JORDAN, TAX COMMISSIONER, 2013-24: I was the first outsider to ever run the tax office. It was considered quite radical when former Treasurer Wayne Swan appointed me not just because, as he said, who better to run the tax office, than a 6 ft six ex-copper. Well, I also think it was the fact, I was not a career public servant.

ALI NOROOZI, INSPECTOR GENERAL OF TAXATION (2008-18): He took the ATO to another level. He was very good at bringing in fresh expertise, fresh pair of eyes into the ATO.

ANGUS GRIGG, REPORTER: In many ways Jordan's past made him an ideal candidate for the top job…. He was John Howard's tax adviser for the 1987 election and later helped on the implementation of the GST.

STEPHEN MAYNE, SHAREHOLDER ACTIVIST: He was an assiduous networker, quite the party animal and very well known around town and very good at his job. So he was very popular on both sides of the political street.

ANGUS GRIGG, REPORTER: Jordan had a stellar career with top tier accounting firm KPMG.

STEPHEN MAYNE, SHAREHOLDER ACTIVIST: He became chairman of KPMG in NSW around 2000 and on the Board of Taxation advising the government and he served on that for many years. And then was he was plucked from that role in 2012, and into the top job at the ATO.

ANGUS GRIGG, REPORTER: And so when Treasurer Wayne Swan tapped him to run the tax office, he described Jordan as his poacher turned game keeper. In mid-2021 an anonymous letter about Jordan's time at his old firm KPMG began circulating.

TEXT-ON-SCREEN: 19 July 2021

To Whom it May Concern,

Christopher Jordan is presently the Federal Commissioner of Taxation. He joined KPMG in 1986…

ANGUS GRIGG, REPORTER: It contained serious allegations about whether he was an appropriate person to be Tax Commissioner.

TEXT-ON-SCREEN (continues): It is inconceivable that a person such as Jordan could have been appointed.

ANGUS GRIGG, REPORTER: The letter made its way to Neil Chenoweth… who set about investigating Jordan's links to an offshore company in a secrecy jurisdiction, a decade before he became Tax Commissioner.

ANGUS GRIGG, REPORTER: So how did you piece it together?

NEIL CHENOWETH, REPORTER: Well, I discovered that Chris Jordan and three friends had, had got a former colleague to set up an Isle of Man company in October,1998.

ANGUS GRIGG, REPORTER: Why do you go to the Isle of Man?

NEIL CHENOWETH, REPORTER: Well, most, most, for most people it's because it's low tax and, uh, and it's a secrecy jurisdiction.

ANGUS GRIGG, REPORTER: So where did the documents take you next?

NEIL CHENOWETH, REPORTER: Well, I was able to find out that the Isle of Man company had a bank account and someone I, we don't know who, transferred $3.3 million into it on March 3rd, 1999.

ANGUS GRIGG, REPORTER: And where did the money go then?

NEIL CHENOWETH, REPORTER: Well, two months later it gets transferred to a company in just set up in New Zealand.

ANGUS GRIGG: And does it stay in New Zealand?

NEIL CHENOWETH, REPORTER: Almost immediately it gets transferred to, into, as an investment into two companies in Australia.

ANGUS GRIGG, REPORTER: It's unclear what role Jordan had after the company was set up… and it's not unusual or illegal for the top end of town to use these structures.

ANGUS GRIGG, REPORTER: And so what was going on in Chris Jordan's life around this time that these transactions were happening?

NEIL CHENOWETH, REPORTER: Well, that's what makes it so interesting because at the time he was advising John Howard on how to introduce GST. And you know, I guess my view is if you are a future tax commissioner, you have to put your cards on the table. You have to be completely clear in terms of what you've done. You need to tell someone.

ANGUS GRIGG, REPORTER: All tax office staff are required to declare their financial interests… but historical arrangements are a grey area.

KAREN PAYNE, INSPECTOR GENERAL TAXATION (2019-24): You should be disclosing upfront, these are all the things that I have done or that, um, that I'm currently doing that may give rise to, um, either a real or perceived conflict of interest.

ANGUS GRIGG, REPORTER: In a statement Chris Jordan told Four Corners "all the potential conflict issues you raise are not real." He said while he can't recall precise details he was "not involved" with the Isle of Man company mentioned. But he declined to answer if he was directly or indirectly a beneficiary of the company.

ANGUS GRIGG, REPORTER: From billion dollars scams to secretive settlements the failings of the tax office are piling up… But any chance of reforming the ATO is made harder… by how highly it rates itself. Its favoured performance metric is something called the tax gap.

CHRIS JORDAN, TAX COMMISSIONER, 2013-24: Tax gaps estimates the difference between what the ATO expects to collect and the amount that would have been collected if every taxpayer was fully compliant with the law. Now the Tax Gaps Act as our annual health check.

ANGUS GRIGG, REPORTER: Despite recent scandals… in the four key areas of tax, the ATO rates itself above 90 per cent … including its work collecting the GST. Going off the tax gap, if the ATO were at uni… it would be giving itself high distinctions.

KAREN PAYNE, INSPECTOR GENERAL TAXATION (2019-24): It wasn't intuitive for me at least as an, as a chartered accountant, that that was a, a reliable performance measure.

ANGUS GRIGG, REPORTER: Is it a bit of made up number?

KAREN PAYNE, INSPECTOR GENERAL TAXATION (2019-24): It's an estimate, so it is what an estimate is. And what goes behind the estimation I couldn't explain to you.

ANGUS GRIGG, REPORTER: Is that part of the problem?

KAREN PAYNE, INSPECTOR GENERAL TAXATION (2019-24): That's part of the problem because the tax officer I'm sure understands it. But anyone who's not kind of intimately involved with establishing or reviewing tax gap probably has no idea, including myself.

ANGUS GRIGG, REPORTER: The Australian National Audit Office went further, questioning if the tax gap was an accurate performance measure.

SENATOR BABARA POCOCK, AUSTRALIAN GREENS: I've sat in many senate inquiries and listened to the senior officers of the ATO mark their own homework and say how well they are doing at the same time as significant scandals and breaches are underway in our tax system.

ANGUS GRIGG, REPORTER: This inability to fully evaluate the performance of the ATO has led some to call for the Commissioner to be accountable to an independent board.

ALI NOROOZI, INSPECTOR GENERAL OF TAXATION (2008-18): I suggested that the Tax Office should also have a management or an Advisory Board much like ASIC, that it should have an independent chair, that independent chair would be another source of information for the government.

SENATOR BABARA POCOCK, AUSTRALIAN GREENS: I'm very conscious that there are 20,000 people who work in the tax office. It's a really large institution and there are many people in there who could be earning more outside it. And they're motivated by values of a good tax collection system, and they work hard every day to deliver it. I think what we need to make sure is that they are served well by the leadership and governance structures above and around them.

ANGUS GRIGG, REPORTER: Until then, we all bear the cost.

SENATOR BABARA POCOCK, AUSTRALIAN GREENS: Well, that is a lot of schools, it's a lot of hospitals, it's a lot of care for children. We need to make sure we collect that money assertively and fairly so that we can fund all the things we need.