Could the ban on card surcharges lead to a rise in tax evasion?

Small businesses are still figuring out ways to deal with the ban on credit card surcharges that took effect on October 1 and are searching for ways to manage the costs.

While the ban is forecast to save consumers A$1.6 billion a year in surcharge fees, businesses continue to incur the card processing costs charged by the banks.

In response, some businesses have decided to offer discounts for payments in cash .

This could lead to an increase in cash usage after years of decline – and brings with it risks of an expanded shadow economy and greater opportunities for businesses to underreport sales and evade tax obligations .

The shadow economy Australian Taxation Office (ATO) data show that net goods and services tax (GST) collected from cafes, restaurants and takeaway food services reached $4.36 billion in the 2024–25 financial year.

This highlights the contribution of the hospitality sector to the economy.

Even a small proportion of unreported sales could result in significant losses in GST revenue.

The Reserve Bank of Australia (RBA) shows that increased use of cash is driven by the shadow economy, which refers to undeclared economic activity, which is not reported or taxed.

While difficult to measure, official estimates put the size of the shadow economy at about 3% of Australia’s gross domestic product, or equivalent to $80 billion in 2025.

The peak accounting body, CPA Australia, has estimated undeclared income in the shadow economy created a net gap of $11 billion annually in missing taxes.

Federal Treasury says the undeclared sales and undeclared wages are the critical components of the shadow economy.

Read more: Are you seeing new ‘service fees’ since the card surcharge ban? Here are the rules Tax evasion is harder with card payments Over time, the use of cash in Australia has declined significantly, while credit and debit card usage has surged.

RBA data show cash payments fell from 69% of consumer transactions in 2007 to 15% in 2025 .

Use of card payments increased over that time from 26% to 73%.