At tax time, there are some things you need to know about to protect your identity from criminals. We look at the two most common types of identity fraud associated with tax refunds, and look at what you can do to ensure you don’t lose your refund, or become an identity theft statistic with a bad credit rating that will be a nightmare to recover from.

By Graham Doessel, Founder and Chief Executive Officer of MyCRA Lawyers

Criminals Lodging Fraudulent Tax Claims

There have been reports over recent years of Australians unable to lodge their own tax return, because they have found that one has already been lodged in their name. Fraudsters have been able to canvas the tax file number and personal details such as full name, address and date of birth of the individual, and have lodged a claim in their victim’s name, pilfering the return before the victim has even thought about putting their tax in. These people are also vulnerable to bad credit through identity theft – if fraudsters take out credit in the victim’s name as well.

It was reported in Ninemsn yesterday that the Australian Taxation Office (ATO) blocked payments worth $40 million last year that would have gone to criminals. This represents more than double the revenue the tax office protected the previous year in identity crime-related cases – with the reported interception of 8,000 fraudulent tax claims.

But officials tell Ninemsn they have little idea how much money they lose to identity thieves who con them into actually paying out on fraudulent returns. Last year it was reported in The Telegraph that in the previous financial year the number of stolen tax file numbers suspected of use in identity fraud topped 31,200 – from 12,669 the previous year.

How do criminals get your tax file number?

The ATO recently sent out a media release warning about the recent surge in fake job adverts over the internet asking prospective employees to provide their tax file numbers as part of a job application or once they are made an offer of employment, which is later withdrawn.

Ninemsn also reports temporary visa holders such as foreign students are offered cash for the tax file numbers they will no longer need once they leave Australia.

They also say sometimes rogue tax agents are involved.

“People are trusting people they shouldn’t,” Greg Williams, a deputy commissioner in the ATO’s compliance division told Ninemsn.

People who share the same name and birthday are also in the “at risk” category.

But Ninemsn reports, the reasons go deeper:

“… Brett Warfield, a forensic accountant and fraud specialist at Warfield & Associates, said the biggest threat comes from organised crime groups lifting wholesale identity and salary information on employees from private firms or government bodies, either by hacking into company databases or convincing insiders to leak it.

They then use this pilfered data to lodge hundreds of forged submissions with the ATO, he said.

“They tend to submit the tax returns fairly quickly after the end of June to beat the real taxpayer,” said Mr Warfield.

He added that crime gangs still have to outsmart the ATO’s sophisticated fraud risk filters, which cross-check claims against data such as previous entries on income and expenses, mailing addresses and bank account details for wiring refunds.

But when ninemsn used freedom-of-information laws to find out how many such fraudulent returns the ATO fails to intercept, it admitted it does not measure or even estimate its losses.

This is despite increases in funding to detect fraud as well as criticism from the Commonwealth Ombudsman that the ATO fails to investigate or attempt to recover funds in cases of identity theft where losses were deemed “relatively small”.

An ATO spokeswoman said its focus is on detecting fraudulent claims before refunds are paid out — a strategy they say is more effective than trying to recoup sham refunds that have already been issued.

What to do if someone has made a fraudulent claim on your tax refund

Contact the ATO immediately. Last year the ATO established a “client identity support centre” to assist people whose identities were stolen. You could also contact and make a formal complaint to the Commonwealth Taxation Ombudsman if you are unable to come to a solution or been able to lodge your correct refund.

Considering the very important personal information these fraudsters have for you, you should order a copy of your credit file as soon as possible. Check it carefully to make sure there have been no attempts, nor successes in obtaining credit in your name. Notify Police if you find anything strange on your credit file – look for address changes, credit enquiries you didn’t make, and credit accounts.

If criminals have been able to take out credit in your name, it will mean you may have incurred some repayments in arrears and Creditors could be in the process of adding a default or other negative listing to your credit file, even if it doesn’t show up as such right away. You should contact those Creditors as soon as possible to advise them of the identity theft.

For tax crime, which is a Commonwealth indictable offence, Police may advise you that as an identity theft victim, you could be eligible to apply for a Victims of Commonwealth Identity Crime Certificate – which can go a long way in helping to prove you didn’t initiate any credit taken out in your name. This could mean you would be able to recover your ability to obtain credit in your own right and could help with debts that have been incurred in your name.

Fake tax refund scams

On the other side of the coin, if you have been able to successfully lodge your tax return with the ATO, beware of fake emails claiming to be from the ATO asking for confirmation of personal details in order to send your refund to you – or for you to claim your refund.

Here’s what one of these emails might look like, but they take many different forms (picture courtesy of ATO Online Security webpage):

What you should do if you receive an email like this

The ATO advises it will never email you asking for personal or credit card details and you should never provide this information.

One version of this scam contains an attachment infected with a virus. This email purports to be from the ATO and asks for the recipient to complete the attached form to receive a tax refund. There is zip file attached to the message that contains a malicious program. If you receive an email like this, do not open the attachment.

Under no circumstances should you give personal information including credit card or banking details. Anyone who has received a suspicious phone call or email should contact the ATO immediately.

A good way to stay ahead of scams and other ways your identity and credit file could be at risk, is to sign up to the Government’s Stay Smart Online alert service, which will inform you of new scams as they unfold, and hopefully prevent you from becoming a victim, losing money and incurring debt and bad credit as a result.

To get a free copy of your credit file, or if you need help to recover your clean credit file after identity theft – we might be able to help. Contact a credit repair advisor on 1300 667 218 or visit our main site for more details www.mycralawyers.com.au.

Image: Arvind Balaraman/ www.FreeDigitalPhotos.net