The Turnbull government is to consider a ban on the $100 note and a crackdown on all but small cash payments as part of an assault on the cash economy to be unveiled in Monday's mid-year budget update.
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"There's nothing wrong with cash, the issue is when people don't declare it," said Financial Services Minister Kelly O'Dwyer ahead of the announcement.
"The cash economy is worth 1.5 per cent of GDP, that's about $21 billion. If we can get a percentage of that, it's revenue owed to the Australian people."
The amount of money at stake was more than the amount missing as a result of corporate tax avoidance.
Ms O'Dwyer will set up a taskforce, to be headed by former KPMG global chairman Michael Andrew, to draw on the experience of France, where the government is banning cash payments of over 1000 euros, and Sweden, where businesses that trade in cash are required to use a certified cash register that is seen by tax authorities.
The mid-year budget update will not include an estimate of the money that will be saved as a result of the taskforce's work. If there is such an estimate, it will be included in the May budget after the taskforce delivers its interim report in April.
The latest Reserve Bank figures show an explosion in the $100 notes even as electronic payments have become more widely used. There are 12 $100 notes per person in circulation, more than double the five in circulation 20 years ago. There remains about six of the more widely-seen $20 notes in circulation, roughly as many as there were 20 years ago.
The use of $100 notes jumped 9 per cent in just the past year, well above the long-term growth rate of 7 per cent and far more than the use of $50 notes, which jumped 6 per cent and $20 notes, which increased 2 per cent.
"This growth in high-denomination banknotes is well above recent growth in nominal income for the economy and reflects a range of factors, such as overseas demand, which is heavily influenced by movements in the exchange rate, and the fact that high-denomination banknotes are also used as a store of wealth," the annual report says.
Asked on Wednesday whether the $100 notes could be scrapped, Ms O'Dwyer told ABC radio: "I'm not going to put a limit on what the taskforce can look at."
In November India scrapped the 500 and 1000-rupee bank notes and issued new currency in a "surgical strike" against tax evasion.
The 500 and 1000-rupee notes stopped being legal tender on the night of the announcement but people were given 50 days to bank or exchange them. The banknotes declared illegal represented 85 per cent of India's cash in circulation.
In Europe, the €500 note is also being phased out.
In Australia, $50 notes and $100 notes represent 92 per cent of the cash in circulation.
In a submission to the financial system inquiry, former Reserve Bank official Peter Mair suggested doing away with $100 and $50 notes altogether. They would be given a use-by date. Anyone who didn't hand them in within, say, five years would get nothing in return.
He said the bulk of $100 notes appeared to be used for illegal activities and to avoid tax and the pension assets test.
