Businesses must keep and retain accurate records to meet their tax, super and employer obligations. While most people try to do the right thing, a small percentage are deliberately under-reporting their income. One of the ways they have been doing this is by using electronic sales suppression tools (ESSTs).
We have observed these tools in multiple forms such as:
- hardware connected to the point of sale (POS) system
- cloud-based software
- inbuilt software programs.
An ESST can enable a POS system to:
- permanently delete transactions
- re-sequence transactions
- reduce sales values
- misrepresent transactions, and
- consequently, produce fake records.
Legislation was passed on 3 October 2018 making it illegal to produce, supply, possess, use, or promote the use of ESSTs.
We are advising businesses to check their POS system’s function, and if in doubt about the presence of an ESST, to contact the ATO for assistance.
Developing or supplying a product that enables tax evasion is illegal. Engaging in this conduct may lead to significant penalties and prosecution. We are encouraging businesses who had any involvement in ESSTs to come to us first, before we initiate contact with them.
For more information, visit Ban on electronic sales suppression tools.
Penalties now apply
Not removing your ESST when you have one, or not coming forward when you are involved in producing or supplying an ESST, may lead to an audit, amendments and significant penalties for your ESST involvement.
Penalties apply if you:
- produce or supply an ESST
- possess an ESST
- incorrectly keep records using an ESST.
This includes helping others to do any of the above, for example:
- a director whose actions assist their company to obtain and/or use an ESST to incorrectly keep records
- a registered tax professional or other advisor who helps a client to incorrectly keep records with an ESST
- anyone assisting another business owner to produce, supply or possess an ESST, or to use an ESST to incorrectly keep their records.
Penalties can be criminal or administrative in nature, and the amount of the penalty will depend on what you have done (for example, produce or supply, possess or incorrectly keep records using an ESST).
Producing or supplying an ESST
A penalty applies if you or your business:
- manufacture, develop or publish an ESST
- supply an ESST or make it available for use
- provide a service that involves the use of an ESST.
If you are outside of Australia, the penalties apply to you if the ESST is used to change the records that a business needs to keep under Australian law.
The criminal penalty for producing or supplying an ESST is 5,000 penalty units, and the administrative penalty is 60 penalty units for each ESST produced, or person you supplied an ESST to. If you assist others in taking action that would result in a penalty, then a penalty may also apply to you.
Example: Developer and supplier based overseas
Sandra is a software developer based in Spain. She develops an ESST that allows businesses to delete recorded sales and advertises the tool for sale online.
Geoff owns a café in Brisbane. He purchases the ESST from Sandra’s website, installs it on his POS system and uses it to modify his business’ sales records.
Even though Sandra is not in Australia, she has broken the law by developing and supplying an ESST to change records that Geoff is required to keep under Australian tax law. Geoff has also broken the law by possessing an ESST and incorrectly keeping records using an ESST.
Find out about:
Make a tip-off
ESSTs help people avoid paying the amount of tax they’re supposed to pay. This affects all of us – whether as members of the community or as other businesses trying to compete fairly.
If you suspect a person or business is producing, supplying, possessing or using an ESST, or assisted someone else to do so, make a tip-off to let us know.
You can remain anonymous if you wish, but try to give us as much detail as possible so we can better assess the information, for example:
- name and address of the business
- their ABN or a link to their website
- time and date details
- a copy of any receipts
- other details that make you think they are producing, supplying, possessing or using an ESST.
Businesses can let us know by emailing us at ESST@ato.gov.au.
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