Australia Wage Theft Criminalisation FAQ (Closing Loopholes 2024)

From 1 January 2025, intentional underpayment of wages or entitlements is a federal criminal offence in Australia under Fair Work Act 2009 (Cth) s.327A, inserted by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 and supplemented by the Closing Loopholes No. 2 Act 2024. The reform is the most significant employment-law change in Australia in a generation. This FAQ explains the offence, the threshold, who can be prosecuted, and how employers can self-protect.

What exactly is the new offence?

Under Fair Work Act 2009 (Cth) s.327A, an employer (including a body corporate) commits a criminal offence if the employer:

• Is required to pay an amount to or for the benefit of an employee under the Fair Work Act 2009 (Cth), a fair work instrument (modern award, enterprise agreement), or a transitional instrument; AND
• Engages in conduct (act or omission) that results in a failure to pay that amount on or before the day it was due; AND
• The conduct is intentional.

“Intentionally” requires more than carelessness. The prosecution must prove that the employer knew the amount was owed and deliberately did not pay, or deliberately paid less.

FWO wage-theft hub: https://www.fairwork.gov.au/about-us/compliance-and-enforcement/criminal-underpayment-laws

What is the maximum penalty?

For an individual employer:

• 10 years’ imprisonment, or
• A fine of the greater of (a) 3x the underpayment amount, or (b) 5,000 penalty units (~A$1.6 million on current values)

For a body corporate:

• A fine of the greater of (a) 3x the underpayment amount, or (b) 25,000 penalty units (~A$8 million on current values)

These are maxima — actual sentences depend on circumstances. The first prosecutions are expected to focus on egregious cases (systemic underpayment over multi-year periods).

Does this apply to underpayment by mistake?

No. Honest mistakes — miscalculations, payroll errors, misclassification — are not caught by s.327A. The offence requires intentional conduct. However:

• Civil penalties under s.539 still apply to mistakes (up to 60 penalty units per contravention; 600 for serious contravention)
• The Fair Work Ombudsman remains the primary regulator for unintentional underpayments
• Repeated “mistakes” in similar terms can become evidence of recklessness, which is one step closer to intent

Are there safe-harbour provisions?

Yes — partially. Under Fair Work Act 2009 (Cth) s.327B, a “Voluntary Small Business Wage Compliance Code” is available to small business employers (fewer than 15 employees). If the employer complies with the Code published by the Minister at https://www.fairwork.gov.au/, the FWO will not refer them for criminal prosecution under s.327A.

A separate “Cooperation Agreement” pathway under s.327E allows an employer who self-discloses an underpayment to negotiate a non-criminal resolution with the FWO. Self-disclosure must be voluntary, before the FWO commences an investigation, and accompanied by full back-payment.

FWO Voluntary Small Business Wage Compliance Code: https://www.fairwork.gov.au/about-us/compliance-and-enforcement/criminal-underpayment-laws/voluntary-small-business-wage-compliance-code

Who can be prosecuted?

Under s.327A:

• Companies — the body corporate is the primary defendant for corporate wage theft.
• Individuals — directors, executives, payroll managers, and others who personally engage in or authorise the conduct may be prosecuted under accessorial liability provisions (s.550 — “involved in” provisions extended).

This is a fundamental shift. Previously, only the corporate employer faced civil penalties. Now, individual decision-makers face criminal liability and prison.

What about superannuation underpayments?

Section 327A applies to amounts owed under the Fair Work Act 2009 (Cth) — wages, allowances, leave loadings, casual loadings, etc. Super contributions are governed by the Superannuation Guarantee (Administration) Act 1992 (Cth), so are not directly within s.327A. However:

• Underpayment of super remains subject to the Superannuation Guarantee Charge (10% interest, non-deductible)
• Director Penalty Notices under Taxation Administration Act 1953 (Cth) Sch 1 Div 269 can make directors personally liable
• The cumulative regime — civil penalties + SGC + DPN + s.327A wage criminal liability — creates strong compliance incentives

ATO super compliance: https://www.ato.gov.au/businesses-and-organisations/super-for-employers/avoiding-mistakes/super-guarantee-charge

Does s.327A apply to past underpayments?

The offence applies to conduct on or after 1 January 2025. Conduct before that date remains subject to the previous civil-penalty regime under s.539. However, ongoing failure to remediate a pre-2025 underpayment may amount to a continuing offence if the employer continues to refuse payment after 1 January 2025.

What records should employers keep?

Under Fair Work Act 2009 (Cth) s.535, all employers must keep records for 7 years covering pay, hours, leave, super, and termination. From a wage-theft defensive perspective, employers should also document:

• Award / classification analysis for each role
• Pay-rate calculation (base + loading + allowances)
• Annualised salary set-off arrangements (where lawful under modern award provisions)
• Time-and-wages records — not just rostered hours but actual hours worked
• Pay slip evidence under s.536 + reg 3.46 (12 mandatory items)

A robust audit trail is the strongest defence to an allegation of intentional underpayment.

How does s.327A interact with general civil penalties?

Civil-penalty contraventions under s.539 remain available alongside criminal prosecution. The FWO can elect to pursue:

• Civil penalty only (most cases)
• Criminal prosecution under s.327A (egregious, intentional cases — referred to the Commonwealth Director of Public Prosecutions)
• Both, in sequence (civil penalty for the corporate; criminal for individual)

Double-jeopardy protections apply between criminal and civil for the same person on the same conduct, but parallel proceedings against the corporate (civil) and the individual (criminal) are common.

What is “wage theft” in practice?

Examples that may attract s.327A scrutiny:

• Knowingly paying below the modern award minimum hourly rate for an extended period
• Knowingly classifying employees as casuals to avoid leave entitlements when they are not casuals under s.15A
• Knowingly using an “annualised salary” to absorb overtime where the award does not authorise that absorption
• Knowingly withholding final pay (annual leave, redundancy) on termination
• Knowingly not paying the FWIS-stated public holiday or weekend penalty rates
• Knowingly using sham contracting arrangements to avoid employment obligations (s.357 also applies criminal sham-contracting provisions in Closing Loopholes No. 2)

What are state wage-theft laws?

Before the federal offence, three states criminalised wage theft:

• Victoria — Wage Theft Act 2020 (Vic), commenced 1 July 2021
• Queensland — Criminal Code (Cth) amendments via the Criminal Code and Other Legislation (Wage Theft) Amendment Act 2020 (Qld), commenced 14 September 2020
• South Australia — currently in legislative consideration

The federal s.327A operates alongside state laws but the Constitution’s exclusion clauses mean that, for national-system employees, federal law generally prevails. Operators in the affected states should still be aware of state-level enforcement.

How should employers prepare?

1. Audit pay rates against current modern awards

Use the FWO Pay Calculator at https://calculate.fairwork.gov.au/ for each role. Confirm classification.

2. Audit casual classifications under s.15A (whole-of-relationship test)

Casual misclassification was a primary target of Closing Loopholes No. 2.

3. Audit annualised salary arrangements

Many modern awards permit annualised salaries only where specific reconciliation is performed. Ensure compliance with the award’s annualised-salary clause.

4. Implement a self-disclosure protocol

If an underpayment is discovered, calculate the back-payment, pay it promptly with interest, and document the remediation. Consider self-disclosure to the FWO — Cooperation Agreements under s.327E can be a path away from criminal liability.

5. Review director and senior-manager training

Personal criminal liability under accessorial provisions makes director-level training critical. Payroll managers, finance directors, and CFOs should understand the new framework.

6. Maintain records for 7 years

The s.535 record-keeping obligation supports both compliance and defence.

Where to get help

The Fair Work Ombudsman provides free advice through:

• Pay Calculator: https://calculate.fairwork.gov.au/
• FWIS / Pay Guides: https://www.fairwork.gov.au/employment-conditions/national-employment-standards
• Fair Work Infoline: 13 13 94 (free; covers most issues)
• FWO online complaint and inquiry: https://www.fairwork.gov.au/

For complex or systemic issues, particularly involving classification or salary set-off, employers commonly engage industrial-relations specialists. MmowW Scrib🐮 generates the document layer (employment contracts, FWIS, CEIS, FTCIS, termination letters); the underlying classification analysis is the employer’s responsibility.

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Disclaimer

Legal information, not legal advice. MmowW Scrib🐮 is operated by a licensed Gyoseishoshi (行政書士) office in Japan. We are not Australian solicitors, barristers, or migration agents.

Sources

• FWO criminal underpayment laws: https://www.fairwork.gov.au/about-us/compliance-and-enforcement/criminal-underpayment-laws
• FWO Voluntary Small Business Wage Compliance Code: https://www.fairwork.gov.au/about-us/compliance-and-enforcement/criminal-underpayment-laws/voluntary-small-business-wage-compliance-code
• FWO Pay Calculator: https://calculate.fairwork.gov.au/
• Federal Register of Legislation — Fair Work Act 2009 (Cth): https://www.legislation.gov.au/Series/C2009A00028