The Australian Taxation Office has issued a warning to merchants using point of sale terminals that it is on the lookout for businesses using “electronic sales suppression tools” to manipulate records and under-report sales.

In the latest edition of the Small Business Tax and Super News, the ATO said ESSTs are illegal and fines apply to anyone supplying or possessing them.

“We have seen these tools appear in multiple forms: hardware connected to the point of sale system; cloud-based software; and inbuilt software,” The ATO said.

It has an ESST team, which is initiating investigations and also helping businesses with inquiries.

An ESST is classified as any functionality that: permanently deletes or re-sequences transactions; changes transactions to reduce the amount of the sale; misrepresents records by re-categorising a product to avoid GST; or produces fake records.

In one case study, a café owner uses the ESST function to delete cash transactions from the business sales records.

In another, a shop owner runs a script each month to reduce high-value transactions by substituting them for cheaper items.