The Australian Taxation Office (ATO), through its Serious Financial Crime Taskforce (SFCT), has identified an alarming trend among businesses: the illegal use of electronic sales suppression tools (ESSTs) to underreport taxable income and evade taxes. With the increasing digitisation of business operations, there is a growing concern about the prevalence of these tools, which are being misused to manipulate sales records and misrepresent financial data.
What are ESSTs?
ESSTs are software or hardware tools that can be connected to point-of-sale (POS) systems to alter or delete transaction data. These tools can be used to:
- Permanently delete or re-sequence sales transactions.
- Reduce the reported sales values.
- Produce fraudulent tax records to avoid paying the correct amount of tax.
In recent developments, ESSTs have evolved to include cloud-based software and systems that link to both domestic and offshore payment platforms, further complicating efforts to trace and regulate their use.
Illegal since 2018
Since October 2018, it has been illegal in Australia to produce, supply, possess, use, or promote ESSTs. Despite this, the ATO is aware of a sophisticated network of operators who are actively developing and marketing these tools to businesses, especially small business owners. These tools are often disguised as comprehensive business solutions, with features such as low commissions, online ordering systems, and integrated website management.
The Taskforce’s response
The SFCT is issuing a strong warning to businesses that are using or considering using ESSTs. The taskforce has a variety of tools and intelligence sources to identify businesses involved in these illegal activities, including:
- Lifestyle indicators and data analysis.
- Bank information.
- Small business benchmarks.
- Tip-offs from members of the community.
Businesses found using ESSTs will face severe legal consequences, as the ATO is committed to cracking down on tax evasion through these fraudulent practices.
What should businesses do?
If your business has been using ESSTs, the SFCT advises that it is in your best interest to come forward and make a voluntary disclosure. By doing so, you may be able to reduce the penalties associated with the illegal activity.
For all business owners, it is essential to exercise reasonable care when selecting POS systems or any business-related software. Make sure that the systems you choose not only meet your business needs but also comply with Australian law. Ignorance is not an excuse when it comes to tax compliance.
Key takeaways
The use of ESSTs is not just a breach of tax law—it is a serious financial crime. The ATO, through its SFCT, is committed to identifying and prosecuting businesses that engage in this illegal activity. It is imperative that businesses act responsibly, choose compliant systems, and pay their fair share of taxes to avoid severe legal consequences.
