Tougher tax evasion penalties closer

Tough new penalties for companies that use software tools to reduce their sales records have passed the lower house of federal parliament.

Existing penalties aren't enough to stop businesses using software to hide sales and reduce their tax, a federal government minister says.

Kelly O'Dwyer says tougher penalties, including fines up to $1 million, will deter those who take part in the black economy.

Legislation to create offences and introduce penalties for those who use sales suppression software has passed the lower house.

Under the new laws, courier and cleaning companies will be required to report annual payments to contractors to the Australian Taxation Office.

Ms O'Dwyer says participation in the black economy undermines trust in the tax system, creates an uneven playing field for businesses, fosters the exploitation of workers and results in a loss of government revenue.