The Reserve Bank is printing $100 and $50 notes at unprecedented levels to feed surging demand from Australia’s underground cash economy, which is estimated to be worth as much as $100 billion.
Once printed, the notes are being directly circulated through Australia’s major banks and other financial institutions into the coffers of criminal gangs and the pockets of individuals doing cash jobs to avoid paying income tax and GST.
Experts also believe there has been an upsurge in the number of people storing cash in their homes to remain below the government’s pension assets test thresholds and continue drawing welfare.
Last year the Reserve Bank printed 166 million Australian notes, with the $100 and $50 denominations now making up 92 per cent of all the notes in circulation by value ($60.36 billion) and 67 per cent (908 million) in number.
In total there was $65.48 billion worth of Australian notes in circulation at June 30 last year.
But the fresh notes are being snapped up almost as fast as they are being printed, and the Australian Crime Commission, Australian Tax Office, transaction reporting authority Austrac and other authorities are working overtime to stem the illegal cash activity driving most of the demand.
The Crime Commission has estimated that organised fraud including tax evasion costs the Australian economy $6.3 billion a year. But that amount is overshadowed by the estimated $36 billion major crime gangs are said to syphon out of the economy each year.
ATO on the case
The Tax Office is stepping up the fight against the cash economy, using new sophisticated data matching software in a bid to detect individuals and businesses dealing in cash and not declaring their income.
In the firing line are tradies, hairdressers, restaurants and food outlets, and those in the clothing industry, according to the ATO.
It is doing this by cross-checking data gleaned from bank accounts, credit card statements, accounting software systems and other sources including information provided by overseas authorities.
An ATO spokesman told The New Daily: “We made over 280,000 compliance or assistance contacts with small businesses exposed to the cash and hidden economy. This work was supported by improved analytics and better data about electronic payments, online advertising and online business.
“In the course of the year, over $220 million in tax and penalties were raised from activities undertaken to protect honest businesses.”
Last year the ATO received almost 34,000 tip-offs on tax evasion, with 21,890 being referred for further investigation. Most were subject to detailed audits.
Yet, although the regulators are scoring some wins to claw back lost cash, the great disappearing note act is showing no signs of slowing down.
The cash drain continues
“It’s very hard for anyone to say what is the balance between organised crime and tax cheats in terms of the disappearing cash,” Steve Worthington, adjunct professor at Swinburne University told The New Daily.
“I’ve also had discussions that many people are hoarding cash so they come underneath the assets test level for welfare payments,” Professor Worthington said.
“Individual banks are running short of $100 notes and requesting the Reserve Bank to print more of them.”
Commenting on the cash economy, Taxpayers Australia business services manager, tax and superannuation, Lisa Greig, said the highest proportion of demand for notes was from the drug trade, with those avoiding tax also making up a sizeable chunk.
But she said the numbers of people successfully evading tax is declining thanks to improvements in the ATO’s data matching resources.
“If your income doesn’t match certain parameters, the ATO will be concerned you are putting cash on the side.”