From 4 October 2018, the Government has banned activities involving electronic sales suppression tools (‘ESSTs’) that relate to people or businesses that have Australian tax obligations.
The production, supply, possession or use of an ESST (or knowingly assisting others to do so) may attract criminal and administrative penalties.
ESSTs can come in different forms and are constantly evolving, some examples include:
- An external device connected to a point of sale (‘POS’) system.
- Additional software installed into otherwise-compliant software.
- A feature or modification that is a part of a POS system or software.
An ESST may allow income to be misrepresented and under-reported by:
- deleting transactions from electronic record-keeping systems;
- changing transactions to reduce the amount of a sale;
- misrepresenting sales records (e.g., by allowing GST taxable sales to be re-categorised as GST non-taxable sales); or
- falsifying POS records.
Transitional arrangements are in place for six months starting from 4 October 2018 to 3 April 2019 for possessing an ESST.
Taxpayers may avoid committing an offence for possessing an ESST if they:
- acquired it before 7:30pm 9 May 2017; and
- advise the ATO that they possess the tool.
Importantly, the transitional provisions do not apply to the manufacture, development, publication, supply or use of an ESST.
Depending on the offence and severity of the crime, taxpayers can face financial penalties of up to 5,000 penalty units, which currently equates to over $1 million.