But they bought a lot of gold. And they paid in cash.

The duo would fly around the eastern states and buy bars and coins by the kilogram, sometimes spending more than $100,000 at a time.

They'd move from dealer to dealer in a capital city, eventually collecting enough bullion to fill a carry-on suitcase. With dozens of gold traders in Melbourne, Brisbane and Sydney, there were plenty to choose from.

This was early 2015. After their week-long buying spree, they'd disappear again, only to do the same thing the following month.

Even for the murky world of private gold trading, a free-wheeling market prized by legitimate investors and criminals alike for its secrecy and lax regulation, these big cash transactions attracted a lot of attention.

Why? Because, since 2012, authorities have realised that the gold industry is at the epicentre of one of the biggest tax frauds in Australian history. They estimate it's already cost the public more than $550 million. And, despite an exhaustive, four-year investigation, it seems virtually impossible to stop.

The scam is laughably simple, but very lucrative.

When someone buys investment-grade gold bullion that has been stamped into bars and coins, no GST is payable. But the 10 per cent tax does apply to so-called "scrap" gold, which can be anything from cheap jewellery to fragments of 24-carat (pure) gold.

The fraudsters figured out that stamped, GST-free bullion could be smashed into pieces or melted down into scrap, making it suddenly eligible for GST when it was sold on to precious metals dealers and jewellers. The 10 per cent tax was paid by the new buyer, then pocketed by the seller, never reaching the Australian Taxation Office.

These so-called "missing traders" found they could easily reap profits of $1500 to $2500 a kilogram of gold, industry sources say.

But the scam grew exponentially when established players in the gold industry realised it was also possible to claim a GST tax credit after buying bullion that had been melted or even just re-labelled as scrap.

"When word got out you could make a lot of money on this, it spread like wildfire," a gold industry insider says.

"Criminals and con men have always been a problem in the industry. But they've flooded in to make a quid."

The result was the creation of a series of what the ATO has called organised criminal syndicates – buyers, dealers and refiners – who sourced vast amounts of gold bullion from around the country to fuel the fraud.

Hundreds of kilograms of gold began to flow in questionable transactions between members in Melbourne, Sydney and Brisbane each week, then recycled back through the legitimate industry in order to repeat the process.

The demand for gold became so intense that some participants allegedly faked transactions, creating paper trails for bullion and scrap gold that never actually changed hands. And by 2013, the ATO had been flooded with GST claims that it had flagged as suspicious or potentially fraudulent.

The crackdown, known as Operation Nosean, began in October that year. The ATO, Australian Federal Police and the Australian Crime Commission staged more than a dozen raids in Victoria and NSW.

At that point, the fraud had cost taxpayers $65 million. Another $65 million was levied in fines and interest as the ATO sent out penalty bills to gold industry players around the country, who they have refused to name.

The AFP launched proceeds-of-crime actions against at least 10 individuals and companies involved in one of the Sydney-based syndicates. A Supreme Court judge has refused Fairfax Media's request to review the court file.

But the scam carries on.

The ATO reports the cost to taxpayers has now ballooned to more than $550 million and continues to grow. Based on volumes, industry sources guess it may be twice the size. This would make it the second largest tax scam to hit Australia after Project Wickenby, which yielded $985 million in tax and prompted 46 convictions.

While the ATO believes the conduct in the gold industry is fraudulent, traders argue they are just businesses playing the margins. While the suspected criminal activities of at least one syndicate have been referred to federal prosecutors, so far not one criminal charges has been laid.

Fairfax Media understands that, in late 2014, authorities raided a commercial office in Sydney that houses numerous major gold industry traders. Another six "new significant cases" were under investigation by 2015.

But despite all the attention, gold industry sources say that, in Melbourne, Sydney and Brisbane, the trade goes on, albeit on a smaller scale.

"You still see strange people buying bullion and then a few days later trying to sell scrap in approximately the same amount," a source said.

"The scam is so easy to run and not get caught. By the time the ATO catches onto a missing trader, they've shut down and moved on to a new company or a new false ID."

Many of the gold industry businesses allegedly involved in the GST rebate rort since 2013 – who cannot be named for legal reasons – continue to operate, despite being hit with enormous tax bills, which are being contested in the courts.

The ATO, which has declined to comment on the effectiveness of Operation Nosean, said a "number of syndicates" had been identified since 2012.

"The high value of gold and relative ease of availability provides significant opportunity for exploitation, particularly by organised networks,"  ATO assistant commissioner Ian Read said.

"The Australian Taxation Office continues to review various entities in the gold bullion industry to verify their entitlement to GST credits and to ensure they have reported GST correctly."

Questions about the escalating size of the scam were put to Commissioner of Taxation Chris Jordan by Senator John Williams during a Senate committee hearing early last year.

Senator Williams: Would they not be liable for fraud charges?

Mr Jordan: If it was fraud we would have taken action with the Australian Federal Police. What they would be arguing, though, is they would be asserting they were doing what the law allows.

Fairfax Media understands a major problem hampering the ATO is the difficulty in distinguishing between legitimate operators and potential fraudsters in an industry that is only lightly regulated.

Gold trading is a volume industry and mid-tier bullion dealers sell three to five kilograms worth of gold on a regular day. No licence is required to trade in gold bullion, a situation that has allowed organised criminals and professional fraudsters to infiltrate the industry.

Brisbane precious metals trader Robert Bourke, a self-confessed "middle man" in a one of the alleged GST syndicates, was a veteran criminal with more than 20 fraud, dishonesty and theft convictions and yet was still able to act as a gold buyer on behalf of self-managed super funds.

Bourke was accused of orchestrating the theft of 100 kilograms of solid gold, but died of cancer last year before he could face court. Investors and creditors lost more than $20 million when his business collapsed.

Another veteran convicted conman, Rocco Calabrese, and a bankrupt Sydney businessman have also been implicated in the GST scam.

In a licensed industry – financial planning, pawnbroking, used cars or real estate – convicted criminals and bankrupts would face (and fail) a "fit and proper person" requirement.

But the GST scam has only exacerbated the infiltration of organised crime figures into a business that is already being exploited to launder money and hide the proceeds of crime.

Under current laws, no identification needs to be presented when buying or selling less than $5000 worth of bullion. Dodgy gold traders can easily circumvent this rule by allowing customers to conduct multiple deals below the threshold.

Deals of more than $10,000 require customers to present ID, and the transaction must be reported to the federal agency, the Australian Transaction Reports and Analysis Centre. But that is no major obstacle for criminals given the easy availability of false identification papers.

Like the world's central banks, criminals have also realised that gold is the ultimate form of money. Compact, anonymous and highly valuable, it is used to pay debts, hide money and buy drugs and weapons, sources say.

One kilogram of gold is worth more than $58,000 and is about the size of an iPhone 5. In comparison, the same amount in $50 bills would fill a shoebox.

Unlike cash, property or luxury cars, gold is effectively untraceable. It can be melted and moulded into any shape and it won't degrade when buried or submerged in water.

Stolen jewellery is easily melted down in smelters that can be bought on eBay or from jewellery supply shops for a few hundred dollars, tools also used by "missing traders" to convert their bullion to scrap.

The Australian Crime Commission reports that some criminals have even had gold melted into the shape of nuts, bolts and tools, and ship large volumes of gold internationally disguised as metal parts.

Gold bullion has also been turning up in police investigations around the country, seized along with drugs, cash, casino chip and firearms.

"Criminals consistently seek to exploit financial products or sectors that are perceived to be more lightly regulated than other areas," Austrac reports.

cvedelago@theage.com.au