Businesses will face criminal and civil penalties from next year if they make or accept cash payments greater than $10,000 amid a federal government crackdown on lost tax revenue.

An exposure draft for the government's "restrictions on the use of cash" laws outlines fines of more than $25,000 and possible prison sentences of two years for business owners who knowingly accept or pay large transactions in cash after January 1, 2021.

Large cash payments are set to be outlawed from 2020. Credit:Louie Douvis

An explanatory note from Treasury reveals the new rules would also tighten requirements for companies governed by Australia's anti-money laundering laws, who currently report large cash payments to the Australian Transaction Reports and Analysis Centre (AUSTRAC).

Companies providing services like gambling, financial services and digital currencies must report large cash payments to AUSTRAC, but a note on the new laws suggests this could be altered in 2021 when many of the entities that report under this scheme "will be subject to the cash payment limit like all other businesses in the economy".