‘Time in prison is even a possibility’: ATO shadow economy prosecutions ramp up

ATO data showed that over the past two years, it has prosecuted more than 350 individuals and entities. Its conviction rate jumped by 60 per cent, with convictions of more than 305 individuals and entities.

Queensland (28 per cent) had the highest proportion of shadow economy activity in 2025–26, followed by Western Australia (26 per cent), and NSW (20 per cent). Together they accounted for three-quarters of all successful non-lodgment prosecutions across Australia.

ATO assistant commissioner Tony Goding warned that the rising number of prosecutions and convictions shows that those who break the rules are being caught and held accountable.

“The cost of deliberately not lodging isn’t measured in fines alone,” he said.

“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.

“What might start as a shortcut can quickly become a dead end, with serious financial, professional and personal consequences. Behind every conviction is a real person facing real costs from their choices, and behind every tax avoidance is money diverted from community services Australians rely on every day.

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

Goding continued that while operating in the shadows to avoid tax and super obligations may seem like a victimless crime, it still costs 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 café owner, and you deliberately avoid paying the right amount of tax, you risk more than financial penalties. A criminal conviction can have a significant impact on your reputation, business viability, and ability to travel overseas, as well as make it harder to borrow money or obtain insurance.”

The shadow economy refers to individuals and businesses that do not fulfil their tax obligations, whether by not paying the tax or super they are supposed to, demanding cash payment for work, or workers missing out on their entitlements.

Goding delivered a clear warning for businesses and individuals: “Deliberately ignoring your obligations comes at a significant cost”.

How accountants can help clients stay compliant

Tax professionals play a critical role in ensuring clients meet their obligations and comply with the law, Goding told Accountants Daily.

“Tax professionals support the integrity of the system by encouraging accurate reporting, promoting good record keeping and helping clients understand their obligations,” he said.

“They can assist businesses to understand and prepare for their obligations well before lodgment is due, avoiding costly mistakes and penalties.”

The ATO pointed accountants with small business clients to its resources and information, including an upcoming live stream on its compliance focus areas and priorities.

Tax professionals can hear directly from ATO subject matter experts on key changes and emerging systems through the ATO’s open forums, where they can ask questions.