Australia’s workplace laws have tightened again, and this time the consequences for employers getting it wrong are more serious than ever.
Under the ‘Closing Loopholes’ amendments to the Fair Work Act 2009 (Cth) (‘Fair Work Act’), deliberate underpayment of wages became a criminal offence from 1 July 2025. This means employers (including company directors and senior managers) could face jail time for intentionally underpaying staff.
Combined with the reverse onus of proof introduced by the amendment to the Fair Work Act via the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (‘Protecting Vulnerable Workers Amendment’), these new laws reinforce one simple message: keeping accurate wage and time records is no longer just good practice, it is essential to staying compliant and avoiding serious penalties.
The new law: wage theft becomes a crime
As a result of these changes to the Fair Work Act, the Fair Work Ombudsman now has greater powers to investigate and prosecute cases of deliberate underpayment. Under the reforms:
- Intentional underpayment of employees’ wages will be treated as a criminal offence.
- If the Court can determine the amount of the underpayment, companies can be fined the larger amount of either 3 times the amount of the underpayment or $8.25 million.
- If the Court can determine the amount of the underpayment, individuals can be fined the larger amount of either 3 times the amount of the underpayment or $1.65 million.
- Individuals who are found to have intentionally underpaid workers can also face up to 10 years imprisonment.
The criminal provisions will not apply to honest mistakes. However, the bar for what is considered an “honest” error will be high, and particularly difficult to prove if you lack good record keeping.
This is a major shift for private business owners, as directors and managers will no longer be able to rely on vague processes or incomplete payroll records as a defence against an intentional underpayment claim.
The 2017 reverse onus of proof: the foundation for accountability
This new criminal framework builds on the Protecting Vulnerable Workers Amendment, which introduced the reverse onus of proof for underpayment claims.
Before 2017, it was up to the employee to prove they were underpaid. Now, if your employment records are incomplete or missing, the burden shifts to you as the employer to prove that underpayment did not occur.
In practical terms, this means:
- If there is an allegation of underpayment; and
- You can’t produce compliant wage, time, or payslip records,
there is an assumption at law that an underpayment occurred, and you must disprove it.
This shift was designed to protect vulnerable workers like young people, casual employees, and migrants, who often face barriers in accessing evidence or understanding their entitlements.
Why record keeping matters more than ever
The combination of criminal penalties and the reverse onus of proof make proper record keeping your first line of defence.
Under the Fair Work Act, employers must:
- Keep accurate records of hours worked, wages paid, and entitlements accrued;
- Provide itemised payslips to employees within one working day of payment;
- Retain records for at least seven years; and
- Ensure their payroll processes are up to date with modern award or enterprise agreement requirements.
Under the Fair Work Act, an underpayment claim must be claim must be brought within 6 years of the alleged underpayment occurring.
If a claim is made against your business, good records can prove compliance. If records are missing, you may fail to disprove the claim, even if the underpayment didn’t occur.
The Fair Work Ombudsman has emphasised that meticulous record keeping can heavily influence the outcome of investigations and prosecutions.
For employers, the combination of criminal liability and reversed proof obligations means it’s never been more important to keep detailed, accurate records.
Good record keeping isn’t just compliance, it’s your protection against financial penalties, reputational harm, and now, potential criminal prosecution.
