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Businesses using cash to dodge obligations

Our focus on businesses that use cash to avoid obligations.

Last updated 1 July 2026

Our focus

We’re cracking down on businesses that use cash to avoid meeting their tax, employer and business obligations. We are focused on businesses that are operating outside the system by not reporting or by under-reporting cash income, paying for business goods using cash or paying cash wages. Keeping transactions 'off the books' is not a mistake – it’s a deliberate action that affects everyone in the community.

Businesses that do this may:

  • fail to report all sales transactions and fail to issue receipts
  • avoid paying GST, income tax, pay as you go (PAYG) withholding, super guarantee, insurance and workers compensation
  • report their income as an amount below the $75,000 threshold to avoid registering for GST
  • exploit workers by not meeting award conditions and workers compensation protections
  • undercut honest businesses by offering cheaper prices for cash.

This behaviour creates an unfair playing field for businesses doing the right thing. It undermines the integrity of the tax system, erodes public trust and reduces funding for essential services like hospitals, schools and roads.

The hidden cost of cash-in-hand

Workers who are paid cash-in-hand or are working 'off the books' are often disadvantaged. They typically:

  • miss out on entitlements such as paid holiday and sick leave
  • receive less than the award wage
  • have income tax liabilities if no tax is withheld from their pay
  • don't receive the super they are entitled to, impacting their future retirement
  • lack coverage under workers compensation for injuries.

This means they are not receiving the entitlements and protections they should be. If they are injured at work, they are not protected and may have large medical expenses to pay themselves.

How to get it right

If you run a business, it’s important to:

Small businesses often rely on tax professionals to help them stay on top of their tax and super obligations. These professionals play a vital role in supporting the integrity of the system by asking the right questions about cash income and ensuring businesses report correctly.

We use sophisticated data and analytics to detect businesses that aren’t doing the right thing. Our compliance teams, along with joint operations across government agencies, are actively targeting cash-only businesses that deliberately avoid their obligations.

If you suspect a business is avoiding its obligations, you can report it to our Tax Integrity Centre.

If you're an employee who is paid in cash, you can refer to receiving cash for work you do.

 

Example: Underreporting income and paying cash wages

Stella is the director of Vintaro Spirits & Wine, a liquor production and wholesale business in Sydney CBD. The business showed unusual patterns of large cash withdrawals and deposits linked to Stella’s personal account.

Third-party data and tip-offs suggested underreported income and cash wages. Previous compliance action had not improved record keeping or reporting.

We audited the 2020–21 to 2023–24 income years and BAS from 1 January 2022 to 30 June 2024.

Our audit identified concerning behaviours, including:

  • poor and incomplete records
  • failure to provide requested information
  • inconsistent explanations about transactions
  • cash sales not deposited into business accounts
  • structured cash deposits under $10,000 without explanation
  • business cash income diverted to the director’s personal accounts and used for private expenses
  • same-day cash deposits and withdrawals for personal liabilities.

During the audit, the director disengaged and placed the company into voluntary administration and liquidation.

We:

  • identified significant unreported income
  • amended tax obligations across income tax, goods and services tax (GST), wine equalisation tax (WET) and PAYG withholding
  • gathered further evidence using formal powers.

We adjusted the business’s tax position to reflect unreported income and errors, resulting in:

  • $854,414 additional GST
  • $1,242,637 in additional income tax
  • $330,685 PAYG withholding shortfall
  • $2,779,948 additional WET
  • $54,170 in disallowed GST credits
  • $106,888 shortfall interest charge.

This resulted in total primary liabilities of $5,315,572.

As the business made false or misleading statements, penalties of up to 75% of the tax shortfall were applied:

  • $3,235,678 for activity statement shortfalls
  • $1,119,273 for income tax shortfalls
  • $248,273 for failing to withhold PAYG.

Total penalties were $4,602,965, bringing total liabilities to $9,918,537.

We also reviewed the director’s personal tax affairs, identifying an estimated $564,870 in personal liabilities for the 2023 and 2024 income years. Their tax position was adjusted to reflect the use of business funds for personal expenses.

This shows how important it is for small businesses to:

  • keep accurate records of all transactions
  • report all income, including cash
  • understand tax obligations as a director
  • keep business and personal finances separate, and avoid using business funds for personal expenses.
End of example

How we're taking action

We’re taking firm action against businesses that try to gain an unfair advantage by using strategies to omit income including dealing in cash. The community plays an important role, as we receive more than 1,000 tip-offs each week about dishonest activities. Most tip-offs relate to shadow economy practices, such as demanding cash payments for work.

Since July 2025, we’ve:

  • audited 300 small businesses, uncovering more than $70 million in unpaid taxes
  • issued over $26 million in penalties to those deliberately omitting or under-reporting income including cash.

For more information, see Action to address the shadow economy.

Example: director omitting cash income

Peter is the director of the Ink & Olive Bistro in Adelaide.

He uses a bank account and POS system to record income, wages, sales and expenses, with a 10% discount on cash payments.

Data showed poor record keeping, missing invoices and reports, under-reported cash sales and omitted income. A 2021 and 2022 financial year audit found that:

  • records of cash sales weren’t properly kept with amounts being lower than those reported, using price overwrites and voided sales and discounts for cash
  • wages and expenses paid in cash weren’t reported
  • cash income was mixed between business and personal use by depositing cash into personal accounts and using it to pay personal credit cards and expenses.

These actions resulted in a total of:

  • $1,430,946 unreported income for both years with adjustments made
  • a PAYG withholding shortfall of over $550,000
  • additional tax of around $392,000 when omitted income was added to the director's returns.

Because of this, we:

  • disallowed over $120,000 in deductions due to missing records
  • treated $862,174 as unreported income of the director
  • imposed penalties for false or misleading statements, which were applied at 75% for intentional disregard with a 20% uplift
    • $338,093.10 for income tax
    • $129,276.30 for GST shortfall
    • $317,577.03 due to the director’s intentional disregard and repeated behaviour.

We also applied a director penalty of $416,583.75 for failure to withhold. This was reduced by 25% due to the disclosure made during our audit.

This shows how important it is for small businesses to:

  • keep accurate records of all transactions
  • report all income, including cash
  • understand tax obligations as a director, as ignoring them can lead to serious consequences.
End of example

Keep up to date

Keep your small business on track by staying up to date with the latest tax and compliance information. Learn more by taking our free self-paced online courses designed to help small businesses get it right:

You can also:

  • Subscribe to our free Small business newsletter to get updates that might affect your business.
  • Contact your tax professional to obtain advice specific to your business needs.

 

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