From 'cashies' to convictions: The ATO's $2.7 million warning shot

Hundreds of people and businesses have been prosecuted for tax offences, with millions of dollars in fines handed down as authorities crack down on the shadow economy.

The Australian Taxation Office (ATO) on Thursday revealed non-lodgment prosecutions against "dodgy shadow economy operators" had risen by 80 per cent over the past two years, as it warned those who broke the rules would be held accountable.

The shadow economy involves both legal and illegal economic activity, including demanding cash payments for work, known as "cashies", to avoid tax, and underpayment of entitlements such as superannuation.

The ATO said more than 350 individuals or businesses had been successfully prosecuted in the past two years, resulting in more than $2.7 million in fines.

In the 2025-26 financial year, Queensland accounted for 28 per cent of non-lodgment prosecutions, followed by Western Australia (26 per cent) and NSW (20 per cent).

ATO assistant commissioner Tony Goding said avoiding tax and super obligations was seen by some as a victimless crime, but came at a cost to the community.

"The shadow economy undermines legitimate businesses and reduces revenue that would otherwise fund essential public services that support all Australians," he said.

"It doesn't matter what profession you're in, if you're a tradie, hairdresser or cafe owner, and you deliberately avoid paying the right amount of tax, you risk more than financial penalties."

Of the prosecutions, more than 305 resulted in convictions, representing a nearly 60 per cent increase from 2024–25 and 2025–26 financial years.

Goding said the figures demonstrated the ATO was holding those who break the rules to account.

"People who deliberately break the law risk their reputation and future, and the impact of a criminal conviction extends beyond the courtroom," he said.

"The cost of deliberately not lodging isn't measured in fines alone.

"We've seen business owners receive criminal convictions, lose the trust of their customers and community, and in some cases, lose the very business they were trying to keep afloat. For more serious offending, time in prison is even a possibility.

"Our message to the community is clear: deliberately ignoring your obligations comes at a significant cost."

A 2016 government task force estimated Australia's shadow economy could be worth as much as 3 per cent of GDP, or approximately $50 billion in 2016 figures.

More recent ATO estimates show the shadow economy has continued to grow, reaching up to 5.4 per cent of GDP in 2023.

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