Businesses placed on alert after ATO raids 35 properties in five states over tax avoidance
The raids are part of a worldwide effort to crack down on businesses using illegal technology that obscures sales in order to reduce their tax bill.
The Australian Taxation Office (ATO) has raided 35 entities across Australia as part of a worldwide effort to crack down on businesses using illegal technology that obscures sales in order to reduce their tax bill.
The ATO, together with officers from the Australian Federal Police, raided dozens of businesses — mostly in the hospitality industry — across Victoria, New South Wales, Queensland, Western Australia and Tasmania last week, though no charges have been laid.
The raids follow an investigation into electronic sales suppression tools (ESST) which allow businesses to either delete or alter transactions or sales values, allowing them to declare a lower bottom line at tax time.
“These dodgy sales suppression tools allow retailers to keep a separate set of books and launder the money in one transaction,” ATO deputy commissioner John Ford explained.
“They conceal and transfer this income anonymously, sometimes offshore.”
For example, Ford says, a customer may order a $60 steak and a $100 bottle of wine, but the ESST software may log it in the system as a $10 bowl of chips and a $4 bottle of soft drink.
“Adding ESST to your point-of-sale system is a deliberate and underhanded act designed purely to under-report income and avoid tax obligations,” Ford stressed.
“It’s illegal and it will not be tolerated here in Australia. Businesses using or promoting this technology are effectively stealing from the Australian community, and that’s simply not on.”
It follows a global push to crack down on ESST. ATO officers had been working closely with counterparts in His Majesty’s Revenue and Customs (HMRC) in the United Kingdom and the Internal Revenue Service (IRS) in the United States, sharing evidence, intelligence gathering, search warrants, notices to produce, interviews, taxation assessments, and subpoenas.
The ESST can take several forms, Ford continues, including permanently deleting transactions, re-sequencing transactions, reducing sales values, misrepresenting transactions, and, as a result, producing fake records.
“We’ve seen ESSTs appear in hardware connected to the point of sales system, cloud-based software, and capability built directly into the software,” Ford said.
“Through the international collaboration, we have access to a global network of intelligence analysts and investigators – it’s only a matter of time before you’re caught by us, or one of our partners.”
Businesses using ESST have been urged to come forward voluntarily to ‘fess up, with the tax office possibly providing leniency including a reduction in penalties.
They’ll need to re-file tax returns and business activity statements from years past, but it is a far better option than being discovered by an ATO investigator and being subjected to the full force of the law.
It comes amid a new era of bolstered resourcing for the ATO under the Albanese Labor government. In November’s federal budget, the government revealed plans to reclaim at least $5.7 billion of the debt by investing in the resources of tax regulators.
That included spending $242.9 million to extend the ATO’s Shadow Economy Program for a further three years and $80.3 million to extend the ATO’s Personal Income Taxation Compliance Program for a further two years.
The federal government also announced in its 2022-23 federal budget last month that it will invest $1.1 billion to increase and extend funding for the ATO’s Tax Avoidance Taskforce, which will be extended to 2025.
“The vast majority of taxpayers do the right thing but cheating on your taxes is not a victimless crime,” Assistant Treasurer Stephen Jones said.
“It directly impacts funding for vital services from equipping our defence force personnel to caring for our aged.”
