Exclusive Companies Professional Services Tax avoidance ‘Absolutely rampant’: How the ATO missed a $4.6b crime wave Influencers on TikTok are being blamed for an explosion of fraudulent GST claims that banks and accountants say went unchallenged for years. Neil Chenoweth Senior writer Aug 14, 2023 https://www.afr.com/companies/profe...-ato-missed-a-4-6b-crime-wave-20230812-p5dw0l An explosive wave of fraud that has shaken the Tax Office’s GST system had been building for months before accountants began to notice early last year. By then it was everywhere and no one wanted to talk about it. “I started seeing it through the office about March of 2022, a few people came in with business files with the ATO – these really large credits going out, big, big credits, unusual credits,” a western Sydney accountant told The Australian Financial Review. “It didn’t prick my attention. Then I saw a few more, and a few more, and a few more. It kept growing. Tax time came [from July 2022] and it was rampant, absolutely rampant.” The fraud is a simple one that involves individuals using their MyGov account to claim refunds on GST payments that were never made. Louie Douvis By then, accountants around Australia were realising that the country was in the thick of a multibillion-dollar explosion of GST fraud that had gone viral. It’s the crime wave the Tax Office didn’t see coming. How big a crime wave? “The inside word among tax officers is $4.6 billion – that is insane,” says the accountant, who like others spoke to the Financial Review on condition of anonymity. “Everyone’s too scared to go up against the ATO.” The Tax Office has confirmed the $4.6 billion figure, which seems likely to be an underestimate. It was “the biggest tax revenue fraud against the community in the history of the ATO”, deputy commissioner John Ford said in a speech in May. The fraud is a simple one that involves individuals using their MyGov account to claim refunds on GST payments that were never made. While the fraud may be simple, piecing together this invisible crime wave raises questions about why the Tax Office took so long to catch on. And now it’s tax time again. While the Tax Office insists it has the fraud under control, accountants in western Sydney are painting a darker picture. “They keep changing [the scam],” an accountant says. “I saw more clients today that [the ATO] didn’t pick up. One guy got $50,000, then another $35,000, then another $25,000. “He hasn’t had to pay it back. He got this at the end of 2022. This isn’t being picked up as fraudulent activity. “I’ve seen two more already this morning. One has a debt of $18,000. He tried to get more but was stopped eventually by the ATO.” A client received $130,000 from fraudulent claims in July 2022 and was not picked up until December. Another client was paid $60,000 last September. How did it get to this? Banks had been warning the Tax Office about a rising pattern of GST fraud – and freezing suspect accounts – from late 2020. They became increasingly frustrated by the apparent lack of action by the ATO, as they were faced with the decision of what to do with the frozen accounts. “We notified the ATO, and they didn’t want anything to do with it,” a bank executive told an adviser. While none of the banks was prepared to talk about the scam, in one example Westpac’s digital fraud team was alerted to a suspect transaction by their anti-money-laundering software in February 2022. A customer with a long history of welfare benefits had deposited a business tax refund for tens of thousands of dollars from the ATO. The digital fraud team passed the alert to the bank’s financial crime and fraud protection division and the Tax Office was notified. But the Tax Office took no apparent action. Westpac, like other banks, made the critical decision to look for other similar deposits from Tax Office payments and began freezing accounts as it found more than 1000 customers linked to suspicious transactions. The Tax Office’s position is that it couldn’t share what it was doing because of taxpayer secrecy, but within the agency there appears to have been disagreement over which section should handle the investigation. The fraud was terrifyingly simple. Anyone with some ID could apply for an Australian Business Number (ABN), then use their MyGov account to register a fictitious business with the GST regime. A June 2023 raid under the ATO’s Operation Protego. Once registered, the new “business owner” would submit a fictitious business activity statement in which they claimed to have spent a huge amount of money setting up the business. They immediately applied for a refund on the 10 per cent of these fictitious expenses which was GST. That was all it took. In most cases, there were no questions asked, or alarms raised in the Tax Office’s GST system – just a payout on all claims within 12 business days. In a typical case, an accountant working on a 2023 tax return for a client noticed that he had a business, which the client denied. “But you’ve lodged an activity statement,” the tax agent said after looking at his MyGov account. “You’ve claimed you spent half a million dollars buying equipment.” “Yep, so I did,” said the client, who ended the interview and walked out. By claiming that he had spent $500,000 on new equipment he was able to say he was entitled to be repaid the $50,000 GST component of the purchase price. By mid-2021 the fraud was exploding as social media – in particular TikTok – was full of explainers how to get a “loan” from the government. In one example cited to the Financial Review a man claimed a $50,000 GST refund in August 2021, then raised another $50,000 several months later. It was only when he tried it again last May that the Tax Office caught up with him. The Tax Office says the average claim was $20,000, but a rough survey by accountants in western Sydney of more than 100 participants in the fraud put the average payout at $84,000. While many were on social security, “there are also people that have incomes, there’s a really broad range of people,” an accountant says. Through 2021 the banks were using the FinTel alliance set up by AUSTRAC to share information. By early 2022 they were frantic about what to do with the frozen accounts, with no indication the Tax Office was taking action. At this point several bank executives contacted the Reserve Bank informally to express concern about the rising fraud. The RBA met tax officers in mid-February last year. The Tax Office insists it then moved “swiftly and decisively”. “When our combined intelligence first discovered the rapidly escalating fraud attempts in early 2022, we swooped in quickly,” Deputy Commissioner Will Day, head of small business, told the Financial Review. “By late February 2022, we had dialled up our efforts to put a stop to these fraudulent attempts to a ’10 out of 10′. We pushed our efforts to an ‘11’ when we commenced Operation Protego [in April].” While the Tax Office has referred to using artificial intelligence and sophisticated algorithms to identify the false claims, it arguably had as much to do with brute force, boosting the 170 ATO staff who previously handled fraud to more than 600, in effect playing whack-a-mole with the GST claims. By May, Operation Protego was reporting $850 million of fraudulent payments to 40,000 people. By June, the estimate was $1 billion in payouts and up to 70,000 people involved. By August, the Tax Office annual report said, tax officers had blocked $1.9 billion in claims and raised $1.2 billion in liabilities. But while senior tax officers confidently reported last September that the fraud was under control, the numbers have continued to grow. Deputy commissioner Day, who runs Protego, says that as of June 30 this year, “we have stopped in the order of $2.7 billion in fraudulent refunds and raised liabilities in the order of $1.9 billion”. He says this included $300 million in penalties and interest. The 8.54 per cent general interact charge appears to account for most of this. “I haven’t seen any penalties, not one,” says one accountant. The Tax Office says Operation Protego has resulted in a significant slowdown of fraud attempts, but tax agents says they are seeing new cases every day. Remarkably, while fraud generally involves identity theft to provide a false name, people are committing the GST fraud under their own names. Once caught they are left with a huge and increasing tax debt – which means an end to any future tax returns. “In the worst case you will go to jail,” says Day. Along with the 56,000-plus people caught up by Protego is a trail of personal disaster among some of Australia’s poorest communities. “One of the men with really high debt ended up having a heart attack,” the accountant says. “We had a mother and son in the office this week. He’s got a $50,000 debt on his MyGov account. His mother was horrified. So where’s the 50 grand gone? “This is standard, this is what we’re seeing every day. A few clients I think didn’t mean to do it and got caught up, tried to pay it back, tried to fix it. But their accounts have been frozen so they can’t.” The ATO’s problems with GST date back to 2011 when an importer called Multiflex successfully challenged the Tax Office’s decision not to pay GST claims that the business was being audited. The case prompted a change in the law to overcome the court’s findings. The new law enables the ATO to suspend GST credits but only if it’s reasonable to require verification, for example if there’s a likelihood of fraud. The Inspector General of Tax, Ali Noroozi, in a 2016 report said the ATO was committed to finalising 94 per cent of electronic activity statements within 12 business days. Of 2.5 million BAS statements lodged in 2016 the ATO queried only 28,000, and only 5090 required any adjustment. That’s one in 500. Noroozi, now a PwC partner, noted that “the ATO’s own review found that at least part of the risk assessment systems yielded results no better than random selection”. The ATO has strengthened its algorithms since then, but its systems didn’t have the capacity to detect and flag more than 56,000 fraud cases in a six-month period. In all my years I’ve seen nothing like it. — Sydney accountant The ongoing fraud “is being driven by the open promotion of fraud on social media platforms”, deputy commissioner Ford said in May. “These social media influencers – I prefer fraud promoters – actively glamourise their lifestyles and the luxury assets they buy from theft from the community. “What they are actually influencing, though, is exactly that, theft from health, education and defence and the broader community.” There’s reason to suspect the total is higher than the $4.6 billion figure the ATO is citing – as more previously unreported payouts come to light. Protego has done limited investigation of fraud claims made before 2022. Meanwhile, tax agents point out that the TikTok fraud was made possible by introduction of the MyGov app, which allows individual taxpayers to make the false refund claims directly rather than through a business portal. “MyGov has given them a platform to defraud the government of $4.6 billion,” says the accountant. Ford is upbeat. “We’ve seen a significant slowdown of fraud attempts in the recent months,” he says. The view from the west is less sanguine. “This is every day. Every day there are new cases,” the accountant says. “In all my years I’ve seen nothing like it.”
Exclusive Crypto platforms a ‘getaway’ for half of scam proceeds Lucas Baird and Jonathan Shapiro Aug 14, 2023 https://www.afr.com/companies/finan...way-for-half-of-scam-proceeds-20230810-p5dvhc Key Points Why it matters: Consumers lost over $38 million to scams in the month of June. Now, the AFX says half of that money is washed through cryptocurrency exchanges. It says this funds crime organisations to facilitate their activities. But banks are now taking steps to limit transfers to “high-risk” exchanges. Half of all proceeds from fraud and financial scams in Australia are being washed through cryptocurrency platforms, according to data from the Australian Financial Crimes Exchange. The not-for-profit group said data from its members, which include the big four banks, revealed that 47 per cent of scam funds were sent to accounts associated with cryptocurrency exchanges in the last 30 days of the financial year. “Once funds have been transferred to crypto, it is extremely difficult to recover them.” said AFCX managing director David Pegley. Commonwealth Bank, ANZ, National Australia Bank and Westpac have all taken steps to limit transactions to “high-risk” crypto exchanges. The consumer and competition watchdog has estimated that Australians lost more than $3 billion to financial scams last year and the role of cryptocurrency exchanges as a potential enabler has been a hotly debated issue. In June, the regulator reported consumers lost more than $38 million to scams over the month. Although banks have sought to de-bank crypto exchanges, regarding them as an apparent blind spot in the financial system infrastructure, crypto industry insiders say it is social media and telco companies that allow scammers to access consumers. Mr Pegley said the “funds are eventually channelled to organised crime organisations and facilitate their activities such as dealing in guns, drugs, and other crimes.” The AFCX was created in 2015 so banks, financial institutions and law enforcement agencies could share information to prevent scams and financial crime. Its members include the big four banks, other lenders, Optus and the Department of Home Affairs. Australian Banking Association chief executive Anna Bligh said the data showed that an alarming amount of scammed money was being laundered through cryptocurrency platforms, meaning funds were “virtually impossible to recover”. “As well as stopping scams from reaching our phones, emails and social media, more needs to be done to ensure cryptocurrency is not used as the getaway vehicle for scam money stolen from Australians. “To protect customers, several banks have responded by imposing limitations on transfers to these exchanges,” Ms Bligh said. Commonwealth Bank, ANZ, National Australia Bank, Westpac and Bendigo & Adelaide Bank have all taken steps to limit transactions to “high-risk” crypto exchanges in recent months. Although they have not publicly identified which exchanges were blocked, many have stopped transfers to Binance – the world’s largest exchange in terms of daily trading volume – as local and international regulators circle it. In the US, the Securities and Exchange Commission has launched a lawsuit that alleges Binance and chief executive Changpeng Zhao “wilfully evaded” laws and ran an illegal exchange. The Australian Securities and Investments Commission also cancelled Binance’s local derivatives licence in April. Blockchain Australia said that, while it appreciated that the banks were looking to protect consumers, a collaborative approach was needed to stop fraudulent activity. It is conducting a survey on the digital currency industry about the toll of de-banking on jobs and the sector. “The protection of consumers is paramount, both in protection from scams and not burdening consumers with undue restrictions in who they choose to do business with, which must be evidence-based to ensure they bring genuine benefits without undue costs,” Blockchain Australia said. The measures include additional verifications for first-time transfers, digital credit cards with security codes that change daily and additional detection technology. Although banks and law enforcement agencies have investigated investment scams and made several arrests, the scale of financial crime has not subsided. CBA last week said it had spent $750 million on scam detection while a rise customer losses from scams was a contributor to a $150 million in increased operating costs over the financial year. The use of crypto exchanges to move stolen proceeds beyond the grasp of victims and law enforcement agencies has been apparent in the prevalent bond scams. The Australian Financial Review first reported on the scam in January 2021 after a fake prospectus was circulated to prospective investors claiming to be from IFM Investors. Since then, dozens of reputable investment firms have been cloned by scammers who have solicited funds from victims whose details were gathered by operating fake investment comparison websites. The scammers either encouraged victims to deposit money into an account operated by a wholesale payment authorised deposit-taking institution that transacted payments on behalf of a crypto exchange. But victims and their legal advisers have been left frustrated by blind spots in the financial system that have allowed their funds to be siphoned into crypto exchanges before vanishing. They discovered that the responsibility to perform identity checks was passed around and authorised institutions would only conduct checks on their business customers and not the individual. The exchanges in turn were also duped by scammers. In some instances, victims were asked to provide identity verification documentation such as images of their passport and a utility bill so scammers could open accounts at crypto exchanges in the victim’s name. In other instances, scammers told victims not to trust the exchanges when they sought to verify information.
Wow, so many scammers in Australia. The big 4 accounting firms are corrupt organisations. They always were, remember Arthur Anderson? Generally speaking most US financial firms are predatory in nature like the scumbags who run Goldman Sachs (just watch Margin Call to get a view of their morality). It does seem like the GST scam was just a case of not verifying documentation. Why didn't the AFO just verify their losses?
The guy who wrote this article really understands the Trump phenomenon very well. The real economic divide here in the states started with the signing of NAFTA under Clinton. Global free trade agreements leveraged office & tech workers but totally destroyed the working class in the midwest & southeast. That's really where the opioid crisis is centered. In the end, the owners of hard industries essentially financialized their factories. They benefited economically but the factories were in China & Mexico. So the local economies were destroyed.
analysis A decline in the big four's auditing quality stokes fears of an Enron-style corporate collapse By Adele Ferguson Posted Mon 14 Aug 2023 https://www.abc.net.au/news/2023-08...ine-quality-fear-corporate-collapse/102718744 ABC Investigations' Adele Ferguson looks at the business of financial auditing.(Adele Ferguson) The big four accounting giants racked up billions of dollars in auditing fees in the private sector as the quality of auditing declined, heightening concerns it could trigger another Enron-type corporate collapse. The infiltration of the big four — EY, Deloitte, KPMG and PwC — in government departments has been well documented. What is less well known is their role in the private sector as auditors sprinkling holy water over company financial accounts, as well as offering consultancy services spanning tax minimisation advice, cyber security, IT and strategy. Their power extends to the boardrooms of corporate Australia, where hundreds, possibly thousands, of alumni are directors of the most powerful organisations. Governance and proxy adviser Ownership Matters crunched the numbers for 7.30, using four years of data to unveil a series of uncomfortable truths about the depth and breadth of the big four across the country's ASX 300 companies. The data reveals that 97 per cent of the external audit work of the ASX 300 companies was done by the big four. These companies shelled out an estimated $4 billion in auditing and consulting fees to the big four between 2018 and 2022. But the concentration is in the biggest companies, with the top 20 ASX companies accounting for 50 per cent of the fees. Even more concentrated are the big four banks — CBA, Westpac, National Australia Bank — and Macquarie Group, which spent a combined $832 million over four years, making them the biggest users of the big four's services. But the real figure is unknown as listed companies only disclose consulting work done by their auditors, not other consultancy work. And when it comes to servicing the $3.5 trillion superannuation industry, unlisted companies and trusts, the figures could be even more. A sleeper issue Alarmingly, while the big four have been dominating auditing, corporate watchdog ASIC has found the quality of auditing is declining. It is something Professor Allan Fels told 7.30 is a sleeper issue that could trigger a corporate collapse. "We know that the global financial crisis of 2008 was partly triggered by bad auditing," Professor Fels said. "I have deep fears that something similar could occur to topple the global and the Australian economy in the coming period." Last year, ASIC's inspection reports found deficiencies in a third of the biggest firms. Separate reviews found negative findings in 50 per cent of Deloitte's auditing cases and 48 per cent of KPMG's. Accounting professor John Dumay described it as a market failure. "To me, the value out of the audit is to be able to go to the investor and say, 'We have a good company, we're performing well, the auditors come and have given us a tick in a box, a clean bill of health, you can trust what we've got to say.' That's what an audit is supposed to do," he says. "When it doesn't do that, because there are deficiencies in the audits themselves, then the system breaks down." A review found negative findings in 48 per cent of KPMG's auditing cases.(Four Corners) Auditing plays a crucial role in the integrity of the financial system. Banks, investors, staff, suppliers and superannuation funds all rely on an auditor's independent assessment of financial accounts to ensure they can be trusted to make informed decisions. When it fails it can be catastrophic. The collapse of Enron torched tens of billions of dollars of shareholder and employee money after it emerged that its financial accounts were a sham and it couldn't pay the bills. In Australia, there are at least 10 legal actions underway, all alleging substandard auditing and advisory work across the big four firms. The cases include Noumi (formerly called Freedom Food Group) and its auditor Deloitte, the collapsed construction group Hastie Group and sandalwood producer Quintis, all of which misreported their accounts despite their auditors giving their stamp of approval. When the truth came out, shareholders took a drubbing. 'A failure of regulatory oversight' Against this backdrop, Labor senator Deborah O'Neill recently reopened a parliamentary inquiry into the auditing industry to investigate the structure, deficient regulation and conflicts. She will also look at why ASIC decided as part of a restructure it would abandon inspection reports, shrink the audit team and dump its highly regarded chief accountant, Doug Niven. "It's hard to believe that this relatively new program, which was actually shedding some light on what was going on inside the big four, has been lost in a reshape of ASIC," she says. "I have grave concerns if nobody is watching. That's the perfect conditions in which further degrading of the quality of audit is likely to occur." Labor senator Deborah O'Neill recently reopened a parliamentary inquiry into the auditing industry.(Four Corners) Senator O'Neill said conflicts had become the business model of the big four. "What we're observing is a business model where the conflict of interest is the model of business. That's how you grow your business," she told 7.30. "It's a failure of regulatory oversight that's allowed this to fester. And we cannot allow it to continue." She says the longer an audit firm is inside a company, the more enmeshed relationships become. It means the independence of the audit firm becomes questionable, which can impact their appetite to stand up to clients if accounting irregularities are suspected. If auditors act in the dual role as consultant, that independence can be further compromised. Ownership Matters found that non-audit fees as a proportion of audit work for the audit firms was 39 per cent across the ASX300 companies between 2018 and 2022. This is where the big four act in the dual role of independent auditors and consultants, which is fraught with conflicts of interest.
National Anti-Corruption Commission's real challenge is leadership. Will it learn the lessons of the Robodebt investigation? By Linton Besser Posted Yesterday at 5:11am The National Anti-Corruption commissioner Paul Brereton.(ABC News: Ian Cutmore) It took decades of scandal, and the repeated establishment of royal commissions, but in 2023, the federal government finally faced up to the obvious: Canberra has as much a corruption problem as anywhere else..... Continues.... https://www.abc.net.au/news/2023-08-22/national-anti-corruption-commission-robodebt/102749720
ICAC asks for special surveillance powers as it investigates Toplace By Alexandra Smith August 23, 2023 The NSW anti-corruption watchdog has been given special powers to access illegally recorded private conversations in its investigation into claims senior Liberals were involved in branch stacking to help fugitive Jean Nassif secure development applications. The chief of the Independent Commission Against Corruption John Hatzistergos wrote to the state government requesting the additional powers after the watchdog “obtained certain evidence which appears to be records of private conversations made by a third party”. Ashlyn Nassif and her father Jean Nassif are embroiled in an alleged $150 million fraud.Credit: Brook Mitchell, Instagram The ICAC would not detail which investigation required the extra powers, but a source with knowledge of the matter confirmed it was related to Nassif’s collapsed development empire Toplace and branch stacking....... https://www.smh.com.au/politics/nsw...-it-investigates-toplace-20230823-p5dyxn.html
Victorian Labor's branch stacking probe was 'brushed under the carpet', dead man's daughter says By Andi Yu and Jesse Thompson Posted 12h ago12 hours ago https://www.abc.net.au/news/2023-08...tacking-investigation-report-family/102780084 Mary Nigro's father Celestino Nigro died in 2017 but his membership to the Labor party was renewed for a few years afterwards.(ABC News) In short: One of the families at the centre of a Victorian Labor branch stacking scandal has criticised the party over its fruitless investigation What's next? The family is considering legal action and the Victorian opposition is calling for another investigation Mary Nigro has accused Victorian Labor of sweeping a branch stacking scandal "under the carpet" after an internal probe failed to identify who was responsible. Ms Nigro is the daughter of Celestino Nigro — one of two men who were signed up after they had died to the now-abolished Lalor South branch in Energy Minister Lily D'Ambrosio's seat. The distressed daughter said on Saturday she was considering legal action against Labor after its own investigation, made public on Friday, failed to find out who renewed her dead father's party membership. "I had a feeling that they would just brush it under the carpet," Ms Nigro said. "I really want to find who's behind all of this and what really happened." On Friday, party monitor John Thwaites released a report about his investigation into signature forging and posthumous renewing of memberships that was done for the two dead men, describing it as "egregious". Mr Thwaites reported that everyone he questioned denied any wrongdoing. He attributed the misconduct to "inadequate membership processes that left the Victorian branch vulnerable" and wrote the same conduct "could not be repeated now" because the renewal of memberships in cash or bulk was no longer allowed. The party has also changed local branch structure to improve oversight and governance, and the Lalor South branch has been abolished, he said. Acting Labor state secretary Cameron Petrie has apologised to the families of the two dead men for distress and hurt caused by the renewal of their memberships. "They've admitted guilt, because they did apologise," Ms Nigro said of the Victorian Labor party. "But they've stopped the investigation and everyone's basically washed their hands of it and said, 'we don't know who's involved'. "We might talk to a lawyer and leave it in their hands and see — take legal action." Tom Donato with a photo of his father, Antonio, who died in 2017 but was re-signed in 2018 and 2019. (ABC News: Danielle Bonica) Tom Donato, the son of the second deceased man who was signed up to the Lalor South branch said earlier this month he was shocked to learn that his father had been signed up to the Labor party. He said neither of his Italian immigrant parents were Australian citizens. Opposition wants proper investigation after 'sham' internal probe Victorian Opposition leader John Pesutto said Victorian Labor's fruitless internal investigation into the memberships of dead people was a "sham". "The Labor party has conducted a sham investigation into this branch stacking scandal, whitewashed the results and it's only left the loved ones of the deceased feeling even more aggrieved, when what they deserve is an explanation," Mr Pesutto said. "Nothing in Victoria is going to change whether its branch stacking or incompetence until and unless people start taking responsibility under Daniel Andrews. "What we call for again is a proper investigation into branch stacking and corruption inside the Labor party." Victorian Energy Minister Lily D'Ambrosio has denied any involvement or knowledge of the renewal of memberships of dead people to the Labor party in her electorate.(Channel 9) A state government spokesperson made a short statement on Saturday: "This is a matter for the party." Energy Minster Lily D 'Ambrosio has denied she had any knowledge of alleged branch stacking operations in her northern suburbs electorate of Mill Park.
OPINION A tax bomb was lobbed at young Australians. Some will be protected from the fallout Parnell Palme McGuinness Columnist and communications adviser August 27, 2023 https://www.smh.com.au/national/a-t...otected-from-the-fallout-20230823-p5dysj.html This week saw the release of two intergenerational reports: one detailed how Australia will transfer wealth and power into the hands of a favoured few; the other was a government document with an audacious plan to do it faster. Since former federal treasurer Peter Costello invented them, intergenerational reports have shown a constant and accelerating trajectory: a massive transfer of wealth and resources from young people to older people. Reforms which could address it, such as tax reform or spending restraint, have proven unpopular among politicians, who like to get (re)elected. In 2023, 20 years after the first IGR, another trend has become clear: thanks to immense new spending and a superannuation system that doesn’t work as intended, Australia is conducting a regressive experiment in which young taxpayers fund both the aged and the inheriting classes. The cost of health, aged care, the NDIS, interest on government debt and defence (in that order, with health the highest) will account for half of all government spending in 40 years time – up from a third today – leaving less money for other initiatives. The population pyramid, with far fewer old people than young people, is turning into the long-foreshadowed mushroom cloud. It will soon be top-heavy with people requiring health, disability and aged care, supported by proportionally fewer young people handing over a greater share of their income. Superannuation will only reduce the burden on these services a little, as most people choose to maximise their take from government schemes, concessions and services, while hoarding their accumulated superannuation. That will be pretty bad for everyone trying to make an honest living, but the kids of the well-to-do can expect a sweetener: a taxpayer-funded windfall when their long-living parents finally kick the bucket. Treasury estimates that by 2059, one dollar in every three in superannuation will be passed down as an inheritance. So the system is more or less a wealth transfer vehicle from less advantaged Australians to their more advantaged peers. Forget any edge conferred by private education, it’s the social transfer system that entrenches inequality. Prime Minister Anthony Albanese with Qantas CEO Alan Joyce.CREDIT:LOUIE DOUVIS The tax bomb being lobbed at young Australians went largely unremarked this week, as the treasurer chose to focus on another aspect of the IGR. The cost of climate change over the next 40 years will be $400 billion. Shocking, but also handy for communications purposes, because it meant the treasurer could use the launch of the IGR to talk about his favourite project. Chalmers pictures himself as the driving force behind transforming Australia into a renewable energy superpower. This will be achieved by channelling lots of taxpayer money into the “Powering the Regions Fund, the National Reconstruction Fund, the Hydrogen Headstart and broader clean energy investments”. I can think of one billionaire who has green hydrogen to sell you, just as soon as the government has given him enough of your money to make the speculative technology feasible. But don’t worry, no doubt he’ll pay taxpayers back. Qantas CEO Alan Joyce explained how this week, when he promised that Australians would get back the billions they put into Qantas during the pandemic in the form of corporate taxes. Gosh that’s a good business model. I’ll do it at a discount. If anyone wants to sling me a couple of mill, pinky swear I’ll keep paying the income taxes I am legally obliged to pay anyway. The way governments tuck money into the pockets of business, and business returns the favour, brings us to the other kind of intergenerational report delivered this week. This one was handed down by AFR journalist Joe Aston, who had previously revealed that the 22-year-old son of the prime minister has a Qantas Chairman’s Lounge pass, giving him access to an elite club of Australia’s most powerful. Money can’t buy entry into this club; the invitations are only conferred on people the Qantas Chairman and his CEO Alan Joyce deem it worth currying favour with – or through. (In other news, Qantas’ competitor airline just can’t seem to get approval to run flights to Australia.) On top of that, the prime minister had also solicited an internship at consulting giant PwC for his son, something that is not available to people without such connections. But not to worry. These were simple transactions between a person with political influence, and firms whose profits depend on the good graces of influential politicians. Young Albanese gets to hobnob with the kind of people who might find it politically convenient to give the prime minister’s son a hand-up, maybe a well-paid placement. That’s how power is converted into money under cronyism. But I guess, as the prime minister might say, “if not now, when?” and “if not us, then who?”. At the last election, many Liberal voters abandoned the party in disgust over the party’s amoral meandering. Will Labor voters rouse the same passion? If not over this, then what? Given that Labor claims to favour social mobility and equity and the Liberal Party insists it stands for aspiration and individual enterprise, the political class has shown a remarkable equanimity in the face of these twin revelations of intergenerational discrimination. At this point, it might be worth pointing out that there is one Labor minister who has a historical position on this. Dr Andrew Leigh has written extensively about intergenerational mobility in Australia. He has a noble and long-standing obsession with the topic, which has done him about as much good as his principled position on factionalism. None. Despite his economic scholarship and qualifications, he has been sidelined into the charities’ portfolio, demonstrating that in Labor, professional mobility, like social mobility, is all about cronies. Leigh based his paper on economic historian Gregory Clark’s bookThe Son Also Rises. And with apologies to Hemingway, when cronyism becomes endemic, it’s no fiesta for the rest of us.