The ATO has uploaded a page on its website to give more detail about ‘electronic sales suppression tools’ (Suppression Tools) the Treasury Laws Amendment (Black Economy Taskforce Measures No 1) Bill 2018 banned them from 4 October 2018. (See related Tax Technical article about the passage of that Bill into law.)
Characteristics of an ESST
The ATO noted that ESSTs can come in different forms and are constantly evolving. For example, an ESST can be:
- an external device connected to a point of sale (POS) system;
- additional software installed into otherwise-compliant software;
- a feature or modification, like a script or code, 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 a sales record, for example by allowing GST taxable sales to be re-categorised as GST non-taxable sales;
- falsifying POS records.
Offences relating to electronic sales suppression tools
It is an offence to:
- produce or supply an ESST
- possess an ESST
- incorrectly keep records using an ESST.
Criminal or administrative penalties may apply. Regardless of whether you intended to do the wrong thing, you have committed an offence if it can be proven that it happened. However, in some circumstances you may be able to avoid a penalty. In addition to the offences above, if a business that you manage has committed any of the ESST offences, you may also be liable for those offences.
Producing or supplying an ESST
For a person or business within Australia, it’s an offence to:
- manufacture, develop or publish an ESST
- supply or make available for use, an ESST
- provide a service that involves the use of an ESST.
For a person or business outside Australia, it’s an offence to:
- manufacture, develop or publish an ESST, if the ESST is used to modify records a business needs to keep under Australian tax law
- supply or provide a service that involves the use of an ESST to a business that needs to keep records under Australian tax law.
Criminal penalties apply if you’re convicted.
- A Court may impose a criminal penalty up to a maximum of 5,000 penalty units. (as of 1 July 2017, a penalty unit is $210.)
- If you are not prosecuted for the criminal offence, we may impose an administrative penalty of 60 penalty units.
- If you assist others in taking action that results in an administrative or criminal penalty for production or supply of an ESST, the above penalties may also apply.
Possessing an ESST
You have committed an offence if you acquire, possess, control, or have a right to use an ESST.
Criminal penalties for possessing an ESST apply if you’re convicted.
- A Court may impose a criminal penalty up to a maximum penalty of 500 penalty units.
- If you are not prosecuted for the offence, we may impose an administrative penalty of 30 penalty units.
Incorrectly keeping records using an ESST
It’s an offence to keep, make, alter, or prevent the creation of a tax record using an ESST. The tool doesn’t actually have to be used by the person or business that owns the records.
Criminal penalties for incorrectly keeping records with an ESST apply if you’re convicted.
- A Court may impose a criminal penalty up to a maximum penalty of 1,000 penalty units.
- If you are not prosecuted for the offence, we may impose an administrative penalty of 60 penalty units.
Six-month transitional period for possessing an ESST
There are transitional arrangements in place for six months starting from 4 October 2018 (until 3 April 2019) for possessing an ESST.
If you possess an ESST, you may avoid committing an offence for possessing it if you:
- acquired it before 7:30pm 9 May 2017 (date of announcement), and
- advise us that you possess the tool.
The transitional provisions do not apply to the manufacture, development, publication, supply or use of an ESST.
If this doesn’t apply to you, we strongly encourage you to make a voluntary disclosure and fully co-operate with us to reduce the serious penalties that can be applied.
CPD questions (answers available)
- Were Suppression Tools outlawed from 4 October 2018?
- Could a Suppression Tool be merely a feature or modification, like a script or code, that is a part of a POS system or software, which changes transactions to reduce the amount of a sale.
- Is there an ‘intention’ element in the offence of possessing a Suppression Tool?
- Is the maximum fine 5,000 penalty units, which at $210/unit is $1,050,000?
- Are there transitional arrangements for possessing a Suppression Tool?
- Are there transitional arrangements for supplying a Suppression Tool?