Wage Theft Is Now a Crime: Australia's New Criminal Underpayment Laws 2026
Australia has criminalised intentional wage theft from January 2025. Understand the new penalties (up to 10 years jail), how intentional underpayment is distinguished from honest mistakes, the Voluntary Small Business Wage Compliance Code, and what to do if you are being underpaid.
Criminalisation of wage theft from January 2025
From 1 January 2025, intentional wage theft became a criminal offence under the Fair Work Act 2009. This is the most significant enforcement change in Australian workplace law in decades. Under the new provisions (Part 3A-1 of the Act), it is a criminal offence for an employer to intentionally underpay an employee's wages, superannuation, or other entitlements. The offence applies to national system employers across Australia and covers all forms of monetary entitlements: base pay rates, overtime, penalty rates, allowances, leave loading, redundancy pay, and superannuation contributions. The criminalisation provisions were introduced by the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024, following years of high-profile underpayment scandals involving major Australian employers including Woolworths, Coles, Commonwealth Bank, and numerous restaurant and hospitality chains. These cases revealed billions of dollars in underpayments affecting hundreds of thousands of workers. The criminal provisions complement existing civil penalty provisions — the Fair Work Ombudsman retains the power to pursue civil enforcement action for underpayments that do not meet the threshold of intentional conduct.
Penalties: up to 10 years imprisonment
The penalties for intentional wage theft are severe, reflecting Parliament's intent to treat deliberate underpayment as a serious criminal offence. For individuals (including company directors, managers, and HR personnel who are complicit), the maximum penalty is imprisonment for up to 10 years, a fine of up to $1.565 million, or both. For body corporates (companies), the maximum fine is $7.825 million or three times the underpayment amount, whichever is greater. These penalties are significantly higher than the civil penalties that previously applied. The criminal offence is prosecuted by the Commonwealth Director of Public Prosecutions (CDPP), not the Fair Work Ombudsman (though the FWO investigates and refers matters). The criminal standard of proof applies — the prosecution must prove beyond reasonable doubt that the employer intentionally engaged in the conduct that resulted in underpayment. This is a higher bar than the civil standard (balance of probabilities). Company directors and officers can be personally liable if they were knowingly concerned in, or a party to, the underpayment. Simply being a director is not enough — the prosecution must show the individual's personal involvement or knowledge of the intentional conduct.
Intentional vs honest mistake: where the line is drawn
The critical distinction in the new laws is between intentional underpayment (criminal offence) and accidental or negligent underpayment (civil matter only). An underpayment is intentional when the employer knows they are required to pay a certain amount and deliberately pays less. This includes: knowingly applying the wrong award rate, deliberately not paying penalty rates or overtime that the employer knows is owed, intentionally misclassifying employees to pay them less, and deliberately manipulating time records to reduce pay. An honest mistake occurs when the employer genuinely did not know they were underpaying — for example, due to a misunderstanding of a complex award, a payroll system error, or incorrect advice from an accountant. Honest mistakes are still unlawful and the employer must rectify them, but they do not attract criminal prosecution. The employer bears the practical burden of demonstrating that any underpayment was not intentional. This means employers need to maintain clear records of their pay calculations, the advice they relied on, and the steps they took to ensure compliance. Employers who have implemented genuine compliance systems — regular payroll audits, award interpretation checks, and prompt rectification of errors — are much better placed to demonstrate honest mistakes if underpayments are discovered.
Voluntary Small Business Wage Compliance Code
Recognising that small businesses face particular challenges in navigating complex awards and pay requirements, the government introduced the Voluntary Small Business Wage Compliance Code alongside the criminal provisions. Small businesses (fewer than 15 employees) that self-report underpayments and cooperate with the Fair Work Ombudsman under this Code receive protection from criminal prosecution for those underpayments. To access the Code's protections, a small business must: identify the underpayment, self-report it to the Fair Work Ombudsman, cooperate fully with the FWO's investigation, and rectify the underpayment (including back-paying affected employees in full, with interest). The Code does not protect employers who are found to have intentionally underpaid and then attempted to use the Code as a shield — it is designed for genuine cases where small business operators have made honest errors. The Code also does not prevent civil enforcement action — the FWO can still issue compliance notices or seek civil penalties. However, in practice, employers who self-report and cooperate are typically dealt with through compliance notices and enforceable undertakings rather than court proceedings. If you are a small business owner who has discovered a payroll error, acting quickly under the Code is strongly recommended. Use our Payslip Scanner to check your current pay calculations against award rates.
What to do if you are being underpaid
If you believe your employer is underpaying you, take the following steps. First, gather evidence: collect your payslips, employment contract, relevant modern award or enterprise agreement, and records of your actual hours worked (including overtime, weekends, and public holidays). Use our Payslip Scanner and Take Home Pay Calculator to compare what you are being paid against what you should be receiving. Second, raise the issue with your employer — many underpayments are genuine errors that employers will rectify once alerted. Put your concern in writing (email is best) and keep a copy. Third, if your employer does not respond or refuses to rectify the underpayment, contact the Fair Work Ombudsman. You can make an anonymous enquiry through the FWO website or phone line (13 13 94) to get advice before lodging a formal complaint. The FWO investigates complaints free of charge and can compel employers to back-pay employees, issue compliance notices, and pursue court action for serious or repeated breaches. Fourth, consider seeking help from your union, a community legal centre, or a private employment lawyer. Many provide free initial consultations. You have up to 6 years to recover underpaid wages through the courts, but the sooner you act, the easier it is to gather evidence and calculate the shortfall. Remember, it is unlawful for your employer to take adverse action against you for making a workplace complaint — you are protected by the general protections provisions of the Fair Work Act.
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General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.
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