The phrase ‘underground economy’ might conjure up images of briefcases stuffed with cash or secretive back-alley deals. But in 2025, Australia’s shadow economy is more complex—and more pervasive—than you might think. From off-the-books tradie jobs to digital side hustles left unreported, the underground economy touches everything from household budgets to the nation’s tax base. Here’s how the landscape is changing, what it means for everyday Aussies, and the new policy steps shaking things up this year.
What Exactly Is the Underground Economy in Australia?
The underground (or ‘shadow’) economy covers any economic activity that’s hidden from the Australian Taxation Office (ATO), regulatory bodies, or other authorities. This can include:
- Unreported cash payments for goods and services (e.g. paying your gardener cash-in-hand)
- Side hustles or gig work not declared for tax
- Illegal activities (but also legal work simply not reported)
- Under-the-table wages that dodge superannuation and payroll tax
According to the ATO, the underground economy is estimated to cost the Australian government billions in lost revenue each year. In 2025, with a renewed push for fiscal transparency and digital recordkeeping, authorities are sharpening their focus on this hidden sector.
How Big Is the Problem in 2025?
Recent Treasury estimates peg Australia’s shadow economy at around $40 billion annually—about 2% of GDP. The sectors most affected include construction, hospitality, and the rapidly growing gig economy. Key drivers in 2025 include:
- Inflation and cost-of-living pressures: With household budgets under strain, some workers and small businesses are tempted to accept cash to avoid GST and income tax.
- Digital platforms: The rise of apps for odd jobs and freelance gigs has made it easier to earn side income—sometimes without reporting it to the ATO.
- Increased migration and temporary work: More temporary residents and international students are participating in informal work arrangements, often in sectors like cleaning, hospitality, and delivery services.
ATO crackdowns are intensifying in 2025, with new data-matching initiatives targeting payment apps, e-commerce platforms, and even cryptocurrency exchanges.
Policy Updates: How the Government Is Responding
In the 2025 federal budget, the government allocated an additional $300 million over four years to the ATO’s Shadow Economy Program. Key initiatives include:
- Expanded data-matching: The ATO now receives transaction data from over 30 digital platforms, making it harder for gig workers and small businesses to fly under the radar.
- Mandatory electronic invoicing: Businesses in construction and hospitality must adopt e-invoicing solutions by July 2025, reducing the opportunity for off-the-books cash deals.
- Increased penalties: Fines for underreporting income or failing to declare cash payments have doubled since last year. Repeat offenders risk criminal prosecution.
- Educational campaigns: The government is rolling out new campaigns to help individuals and businesses understand their obligations and the risks of participating in the shadow economy.
These measures are already having an impact, with reported cash transactions dropping in pilot sectors by up to 18% in early 2025.
The Real-World Impact: Why Should Everyday Aussies Care?
While some may see cash-in-hand work as harmless, the consequences ripple far beyond individual tax bills. Here’s what’s at stake:
- Lost public services: Billions in lost tax revenue mean less funding for hospitals, schools, and infrastructure.
- Unfair competition: Businesses that play by the rules are undercut by those who dodge tax and superannuation obligations.
- Personal risk: Workers in the underground economy often miss out on super, insurance, and legal protections. In disputes, ‘under the table’ jobs offer little recourse.
- Audit headaches: The ATO’s sophisticated data-matching means anyone caught under-reporting faces steep fines and possible criminal charges.
Real-life example: In early 2025, a Sydney café was fined $150,000 for systematically underreporting weekend takings and paying staff off the books. Several employees later missed out on superannuation and paid leave entitlements when the business collapsed.
Smart Moves: What You Can Do in 2025
For individuals and small business owners, the message in 2025 is clear: transparency and digital record-keeping are your best friends. Here’s how to stay on the right side of the ATO—and the law:
- Always declare all sources of income, including cash and digital platform payments
- Use e-invoicing and digital payment platforms to create a clear paper trail
- Keep detailed records of all business transactions
- Stay informed about tax obligations, especially if you’re working multiple jobs or side hustles
- Seek professional advice if you’re unsure about what needs to be reported
The cost of getting caught is rising—and so are the benefits of staying compliant.
