Australian Treasury has an exposure draft legislation for an economy-wide system that is up for public comment until Monday.
If the government agrees to the recommendations by the Black Economy Taskforce, any cash payment equal or above $10 000 would effectively become illegal.
The new rules could come in effect as early as January 1 next year.
According to a summary obtained from the Treasury website, the maximum penalty is up to two years in prison or a $25 000 fine.
The draft legislation also states there would be exceptions including all cash deposits and withdrawals from bank accounts with an authorised deposit-taking institution, foreign exchanges and consumer to consumer transactions.
Treasury said in its summary the limit "... sends a strong signal to the community that it is not acceptable to avoid tax and other obligations by paying with cash."
Shepparton's Alan Kulari said he believed the government had purposely gone to the effort to not publicise the proposed legislation.
Mr Kulari said although a $10 000 cash limit did not affect him it was based on the principle of the government removing the right for Australians to use an object that was legal tender.
"My biggest concern is that this is leading to a cashless society and forcing people to use a private institution (bank).
"This hasn't been publicised by the government at all. How can something be legal tender one day and then the next day be illegal."
"I think the government is using crime and tax is just an excuse to justify (to) bring it in. There are already laws for money laundering and the people doing the money laundering is the average person on the street."
Mr Kulari said he feared Australia could adopt a France model, which reduced all cash payments to €1000 in 2015.
In his opinion, Mr Kulari believed this decision would lead the Reserve Bank of Australia to follow suit of Japan, Switzerland, Sweden and some EU countries and set negative interest rates.
He said if interest rates would become negative it would "attack savings" by forcing people to pay the bank to take their savings.
"Savings will be destroyed by this decision. If we reached negative two per cent and you had $100 000 in savings in the bank, you would be paying $2000 just to keep it in there."
Mr Kulari believed the decision to enforce negative interest rates could be used as a mechanism by the government to bail out banks during a recession.
To make a submission against limiting cash payments of $10 000 by Monday, August 12, visit www.treasury.gov.au.
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