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ATO warns small businesses on sales suppression software

Mark Fletcher
August 29th, 2019 · 15 Comments

The ABC has reported the ATO is clamping down on small businesses using sales suppression software to minimise tax.

Ms Jenkins said the ATO was also cracking down on the use of sales suppression software that disguised the transactions within a company’s records.

“There is some really sophisticated software out there that is helping people avoid paying the right amount of tax.

“But whether it is cashless payments or whether it is the use of platforms or apps, it means there is really a trace of your transactions.

“We use merchant data and other sources of information to identify where things just don’t look right. Then we go and have a chat to them and say, ‘Hey, can you explain?’

In the mid 1990s there was sales suppression scam operating in the newsagency channel. I became aware of it because my newsagency software company lost businesses because we refused to offer such a facility.

There was a software program into which the retailer could enter a code and then an amount of cash they wanted to take out of the business unreported. A second set of records was maintained for the ATO and another records for the business owner.

I know because the software was demonstrated to me several times, by someone who had worked for the software company that created the software. They had approached me. I did some more checking with newsagents and discovered the facility in the software was being used.

The matter was reported to the ATO. At their then Box Hill office in Victoria they assembled a task force including representatives from the ATO, Federal Police, Federal Attorney General office. Victorian State Revenue and Victorian Attorney General office. Several of us with knowledge were brought in for a demonstration of the software. There were several follow up meetings with the ATO in Sydney.

Eventually, my software company stopped losing sales because we did not have the tax avoidance facility in our software.

Any retailer deliberately and systematically underreporting their income to avoid tax deserves what they get from the ATO and from any suppliers they impact through their actions.

11 likes

Category: Ethics · Social responsibility

15 responses so far ↓

  • 1 Graeme Day // Aug 29, 2019 at 7:07 AM

    Mark,
    I don’t doubt the story however I hve to say that in the many Reports (thousands) over the years I have not struck this to be a problem. The biggest problem is that the greater majority of operators do not understand the various Reports and just how helpful they can be for their business’s success.
    Most don’t even know how to print off which or what Report necessary to get the Data required.
    Other than than I have founf the data entered is very good and mostly accurate except for the Gross Profit area which is appalling Same with stock entry.

    0 likes

  • 2 Mark Fletcher // Aug 29, 2019 at 8:51 AM

    Graeme, in the 1990s there was a list of 30+ newsagents engaged in this. I want not involved in combining it. However, I did see the list.

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  • 3 Graeme Day // Aug 29, 2019 at 12:28 PM

    I wasn’t questioning you Mark, I stated that, it was more of some of the problems we have in the coal face of preparing a newsagency for sale and this is one we don’t have is Newsagents undervaluing the Revenue through their P.O.S. system.

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  • 4 Peter // Aug 29, 2019 at 8:09 PM

    I saw a chap once who regularly and quite blatantly regulary skimmed. When it came to proving revenue he could not include the skim.

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  • 5 Graeme Day // Aug 29, 2019 at 9:57 PM

    Absolutely, Peter, proper due diligence discovers skimmimg and it can’t be taken into the figures especially if it invovles wages as even the big companies have been found out. 7/11 Domino Pizza and other Franchise and Cafe’s etc have been exposed
    It really means the business is unsustainable if run properly or the current owners problems can’t perform properly because they are strapped with too many committments to do so.
    Cash flow is great it is the currency of survival paying cash deprives business of this.

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  • 6 Mark Fletcher // Aug 30, 2019 at 6:48 AM

    It would not uncover skimming where a retailer buys stock for cash and sells it in a way for which there is no record of income or GST collected.

    The software I saw 20 years ago did all this, ensuring it could not be detected. One business was skimming $1,500 a week.

    1 likes

  • 7 Dean O'Bree // Aug 30, 2019 at 4:06 PM

    On an unrelated note, there was a federal court decision a week or 2 ago that affects personal leave that will affect any newsagent who employs part time or full time staff.

    Prior to this case, if you work full time you receive 76 hours of personal leave per year, which is 10 days at 7.6 hours per day.

    If you work part time then you receive a pro rata of 76 hours, eg if you work 19 hours per week you received 38 hours personal leave per year.

    This court case, which is subject to appeal, changes that.

    A part time or full time employee is entitled to 10 days off per year without loss of pay.

    This means that the 19 hour employee, who may work those hours over 3 days, is still entitled to 10 days off per year, and to be paid the same as though they had worked. If their shifts were 2 days of 6 hours and 1 day of 7 hours per week, and they took all 10 days off on the day they work the 7 hour shift, then this would be 70 hours personal leave per year.

    This is a massive change compared to the previous situation, and could be costly to business.

    The court case is subject to appeal, but all employers of part time and full time staff should be aware of this case.

    1 likes

  • 8 Peter // Aug 30, 2019 at 6:22 PM

    Dean you are Hijacking the story to push a position that suits that suits you. Jims the Great Franchise empire! I see. One of the Great Paragons of Business or the last 20 years.

    thank you

    0 likes

  • 9 Graeme Day // Aug 30, 2019 at 8:51 PM

    Mark, That makes sense to me as I was looking at ythe siyuation as one of retail input rathet than software programming. I see your point no way could this be picked up form any POS system reports.
    Interesting insight into another side, thanks for the explanation.

    0 likes

  • 10 Peter // Aug 31, 2019 at 9:22 AM

    I remember when GST was introduced it was boasted that GST would eliminate skimming and other rortes. At the time I thought this was fanciful and now proven to be the case.

    If you sell in cash with out using and keeping receipts or buy in cash once again with no paperwork then this will be outside the GST take unless you report it. A rorte.

    1 likes

  • 11 Mark Fletcher // Aug 31, 2019 at 9:43 AM

    There are a couple of advisory panels working on this at a federal level and one is focussed on cashless in businesses.

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  • 12 Peter // Aug 31, 2019 at 10:54 AM

    Mark today page 22 page The Australian “Draconian Cash Bill Treats Us All As Tax-Dodging Criminals”.

    Soon all transactions involving money will be recorded on Big Computer systems and check able by Mr ATO (Aus Tax Office a well known Barbarian).

    If I want to give my partner money say for shopping. It will have be Electronic the only choice recorded and check able by Mr ATO.

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  • 13 Mark Fletcher // Aug 31, 2019 at 11:13 AM

    Peter that recording is happening now as is the cross matching and modelling of expenses and GP against the ATO benchmarks.

    If only the politicians would invest a fraction into the tax dodging by big business that they invest is pursuing small business.

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  • 14 Peter // Aug 31, 2019 at 11:43 AM

    Mark yes I know.

    Recerntly and when talked to Mr ATO about my One Touch Payroll he recorded my Voice without me been fully aware of what he Mr Barabian was dong. I then hung up and researched a question for Mr ATO and rang back and soon as I spoke Mr ATO’s computer recognized me and stated a HELLO to me by my name.

    So am known to ATO and all other Government Agencies.

    Dam I can no longer commit sedition or treason.

    0 likes

  • 15 Lance // Aug 31, 2019 at 6:13 PM

    #13
    “If only the politicians would invest a fraction into the tax dodging by big business that they invest is pursuing small business.”

    Mark surly not …. shock/horror…….

    https://www.michaelwest.com.au/top-40-tax-dodgers-2019/

    2 likes

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