Zed Seselja (ACT, Liberal Party, Assistant Minister for Treasury and Finance) Share this | Hansard source

Just briefly, before I answer the more detailed part of your question, you asked at the outset what it is. Simply, it is a device or program or other thing capable of manipulating or destroying records that an entity is required to keep or make by taxation law. The primary function for sales suppression software is to understate a business's income and facilitate the non-compliance of businesses to their tax obligations. As I stated earlier, there is no legitimate use for this technology, as it is used solely for the understatement of income, leading to the purposes of tax evasion, and this new offence would restore integrity to the tax system.

But it is worth, in addition, pointing out that—and part of this is in the explanatory memorandum—a critical element of each of the new offences and administrative penalties is the term 'electronic sales suppression tools'. So the starting point for the definition of electronic sales suppression tools is a device, software program, or other thing or any part or combination of such things. For example, the modification to a device or standard business software can fall within the definition of 'electronic sales suppression tool' even if the device or program as a whole is not. So in such cases a modification is a tool for the purposes of the amendments, and prohibited conduct undertaken into relation to the modification can constitute an offence, even though the overall software or device may also function to complete normal business reporting activity. So the tool must be capable—this is very important—of:

… falsifying, manipulating, hiding, obfuscating, destroying, or preventing the creation of a record that:

  (i)   an entity is required to keep or make by a taxation law;

Importantly also for the defences:

Although 'capability' is a necessary condition, for a tool that has such capability to be an electronic sales suppression tool, a reasonable person must be able to conclude that one of the tool's 'principal functions' is to 'falsify, manipulate, hide, obfuscate, destroy, or prevent' the creation of certain records.

There is an example that's given where there are modifications. It's an important example. It's an example in the explanatory memorandum that uses a hypothetical where there is an individual operating a restaurant who uses a standard POS software to record her sales transactions. Each transaction is stored in a database and is automatically allocated a sequence number. The software has a pre-installed training mode and transactions made in training mode are stored in a separate database. The individual uses a training mode to teach new staff how to enter sales transactions into the POS system and modify or delete transactions that are inadvertently made in error.

The individual contacts a local software supplier to enquire about upgrading her POS software. The supplier offers her two versions of the same software. One is the standard software upgrade developed by the manufacturer, while the other has an additional function which allows the individual to modify or delete sales transactions data from the main database, without trace, by rearranging the sequence numbers.

In this case, the additional function to delete and resequence sales transactions can be isolated from the standard POS software program and a reasonable person would conclude that its principal function is to manipulate and hide sales transaction records and under declared income. As such, this additional function is an electronic sales suppression tool. It could be the software that's designed specifically for this or, in addition, it could be a specific modification that is made specifically for that purpose, which a reasonable person would look at and say, 'This is for the purpose of falsifying records so that you can understate income so that you don't have to pay your fair share of tax.' Therefore, it would fall within the legislation.