Senior Victorian public servants hid a suspected $285 million in COVID-19 business support grants from the responsible minister, according to the state’s anti-corruption watchdog.
The Independent Broad-based Anti-corruption Commission (IBAC) said its analysis (pdf) showed about $257 million was paid to more than 9,000 businesses that were not eligible.
Of that, $108 million went to companies that reported no business activity at all in the three years to July 2022, meaning they were not trading in the months before the pandemic and stayed dormant months after the last lockdown ended.
The report found senior officers removed the suspected loss from a draft report meant for then-Industry Support and Recovery Minister Martin Pakula and the Auditor-General. A later brief to his successor, now-Premier Ben Carroll, contained false and misleading information.
“This was not a one-off event, nor was it due to an oversight,” the report said.
Former Minister for Jobs, Innovation and Trade, Martin Pakula speaks to the media during a press conference in Melbourne, Australia on Sept. 14, 2020. Daniel Pockett/Getty Images
How the Loophole Worked
To qualify for grants under the Business Costs Assistance Program, the state’s largest COVID-19 business support scheme, a business had to be registered for GST on a set date before each lockdown was announced. The rule was meant to show the business was genuinely trading.
But businesses can lawfully ask the tax office to backdate their GST registration by up to four years, and the department’s checks could not tell whether an applicant had done so after a grant was announced.
In June 2021, the tax office told the department that more businesses were backdating their registrations, and that this could be a “red flag” if it happened after grants were announced.
In November 2021, staff estimated about $9 million had been paid in error and agreed it should be reported to the minister.
But when a more detailed analysis put the figure close to $300 million, the deputy secretary directed that it be removed from the draft report. The associate secretary also kept the size of the suspected loss from the department’s head, Secretary Simon Phemister. The officers are not named in the report.
When later shown the figures, Phemister told IBAC, “these numbers just are astronomically large to me.”
He said that if he had been told, he would have said, “Let’s get to fixing it … That’s my job.”
IBAC Calls the Brief ‘Disingenuous’
In September 2022, after the Auditor-General began auditing the grants, the department sent Carroll a brief stating that no payments had been made in error, and that Pakula had been “fully apprised of and approved” the department’s approach. IBAC described that claim as “disingenuous.”
IBAC made no adverse findings against Carroll.
Victorian Premier Ben Carroll speaks to media during a press conference at Parliament House in Melbourne on Aug. 25, 2026. AAP Image/Joel Carrett
Pakula, who retired from politics in June 2022, told IBAC he could not recall the suspected loss ever being raised with him.
“There feels like there is an attempt to kind of conflate here things that … the department knew to be my view … with things that the department would like to be able to say that I knew,” he said.
IBAC found no evidence of political pressure, but did find staff censored themselves because the information would anger the minister or reflect poorly on the department.
In his formal response, Pakula cautioned IBAC against “giving credence to the suggestion that presumed ministerial displeasure might explain a failure by public servants to provide truthful and fulsome information.”
“In my view, it is dangerous for IBAC to provide such a signal, either to the public service or indeed to ministers,” he said.
Whistleblowers Praised: Commissioner
The investigation began in August 2022 after several whistleblowers came forward.
IBAC Commissioner Victoria Elliott said staff had raised the alarm, but “their leaders failed to act, meaning the government was left uninformed and unable to move quickly to address this suspected significant loss of public funds.”
The Auditor-General had reported in November 2023 that there were serious weaknesses in how the grants were run and the checks against fraud and error.
As of April 14, the department had recovered about $8 million, with a further $5 million being recouped under repayment plans.
The findings follow an earlier controversy over the conduct of senior Victorian public servants during the COVID-19 hotel-quarantine inquiry.
In October 2020, the state’s Department of Premier and Cabinet secretary resigned after the inquiry examined his contact with the police chief commissioner and found his actions were inconsistent with his evidence.
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