The cash economy occurs when businesses deliberately use cash transactions to hide income to avoid paying tax. It is also referred to as the 'black', 'hidden' or 'underground' economy. The essential characteristic is that transactions go unrecorded and unreported.
Cash economy activities include businesses:
- paying wages 'cash-in-hand'
- skimming some or all of the cash takings
- running a part of their normal business activities 'off-the-books'
- not reporting the value of goods and services provided in exchange for other goods and services
- operating underground - that is, avoiding their tax and superannuation obligations by not registering their business or lodging returns.
The majority of taxpayers do the right thing; however, some people deliberately engage in cash economy activity to evade their tax obligations and obtain an unfair advantage over other businesses.
The cash economy hurts Australia
Businesses that participate in the cash economy cheat the community and disadvantage Australians who do the right thing.
We are committed to detecting and deterring cash economy activity by taking firm action against those who engage in it.
What we are doing about the cash economy
It is illegal to evade tax by participating in the cash economy and we are making it harder for dishonest operators to get away with it - making it fairer for everyone.
Data matching
We collect significant amounts of information from a number of external sources that we then compare to reported income and expenditure, both business and personal, to identify taxpayers who may be failing to report all their income.
Small business benchmarks
We have published more than 100 small business benchmarks. The benchmarks provide an opportunity for businesses to compare their performance against other similar businesses in their industry. We use the benchmarks to identify businesses for audit that may be avoiding their tax obligations by not reporting some or all of their income.
Voluntary disclosures
Voluntarily disclosing mistakes in your tax affairs that increase your tax or decrease your credits will, in most cases, open the way to concessional treatment for both penalties and interest charges.
Audits and prosecutions
We apply the full force of the law if people deliberately seek to abuse Australia's tax and superannuation systems by engaging in the cash economy.
What you can do about the cash economy
Your choices and actions, as employers, employees, businesses and consumers can all help deter cash economy activity
Definitions
Explanation of terms used in relation to the cash economy.
Last Modified: Friday, 19 August 2011