The ATO this week revealed a sharp rise in prosecutions of people and businesses who simply do not lodge. In a release titled "Out of the shadows", the tax office said prosecutions for non-lodgment linked to the shadow economy jumped by more than 80 per cent between 2024-25 and 2025-26.

The numbers

  • More than 305 individuals and entities have been convicted.
  • Courts have imposed more than $2.7 million in fines.
  • Queensland, New South Wales and Western Australia together accounted for almost 75 per cent of successful non-lodgment prosecutions in 2025-26.

The ATO describes the shadow economy as activity that sits outside the tax system. That includes demanding cash for work to avoid tax, often called "cashies", and underpaying entitlements such as super.

It is not just a fine

ATO Assistant Commissioner Tony Goding put it this way: "What might start as a shortcut can quickly become a dead end, with serious financial, professional and personal consequences."

A criminal conviction can follow you well beyond the courtroom. The ATO points to damaged reputation and lost customer trust, threats to the viability of the business, problems with overseas travel, and difficulty getting loans or insurance. For more serious offending, prison is possible.

Most people who are behind are not criminals

Plenty of people who fall behind are not running a cash scheme. They had a bad year, fell behind on one BAS, and then avoided the pile because they feared the bill. The trouble is that the ATO cannot tell the difference from the outside. Unlodged returns and activity statements look the same whatever the reason, and prosecution for failing to lodge is a tool the ATO is now clearly willing to use.

What to do if you are behind

  • Lodge, even if you cannot pay. Lodging and paying are separate obligations. Getting lodgments up to date stops failure to lodge penalties growing and shows you are engaging.
  • Start with the oldest and the easiest. Work through outstanding BAS and returns in order. Bank statements and your accounting software can rebuild most records.
  • Talk about payment early. Once lodged, payment plans may be available for those who qualify. Contacting the ATO before it contacts you generally leads to a better conversation.
  • Put it all through the books. If any cash jobs have been left out, fix that now. Data matching across banks, payment platforms and other businesses' reports makes gaps easier to find every year.
  • Check your super. Underpaid super is part of the ATO's shadow economy definition, and payday super reporting makes missed payments visible quickly.

The fair play angle

There is an upside for businesses doing the right thing. Operators who dodge tax and super can undercut honest quotes. Stronger enforcement helps level that field.

This is general information only. If you have overdue lodgments, a registered tax agent can help you work out where you stand and deal with the ATO on your behalf.