Is wage theft illegal in Australia?

Yes. Under the Fair Work Act 2009, the intentional underpayment of wages and entitlements has been a criminal offence since 1 January 2025. Employers who deliberately fail to pay workers the full amounts owed can face substantial fines and imprisonment. The criminal offence requires proof of intent, so unintentional errors or miscalculations do not attract criminal liability, but they can still attract civil penalties through the Fair Work Ombudsman. Regardless of intent, all underpayments remain unlawful and employers must back-pay any amounts owed.

When did wage theft become a criminal offence in Australia?

The federal offence commenced on 1 January 2025, through section 327A of the Fair Work Act 2009 (Cth), inserted by the Fair Work Legislation Amendment ( Closing Loopholes ) Act 2023. Several states already had their own wage theft offences, including Victoria (Wage Theft Act 2020) and Queensland, and those continue to operate alongside the federal regime. The federal offence captures underpayments that occur after 1 January 2025 and ongoing underpayments that started earlier.

Does the offence apply to accidental underpayment?

Criminal prosecution requires intent and proof beyond reasonable doubt, so a genuine honest mistake or miscalculation will not meet the threshold for the criminal offence. However, negligent or reckless underpayment can still attract civil penalties through the Fair Work Ombudsman, and back-pay obligations apply regardless of intent. Importantly, "intentional" can be imputed from conduct: an employer whose deliberate actions or inaction result in underpayment can be treated as having intended the result, even if they claim otherwise.

How can employers reduce their exposure?

Review and update employee classifications and pay rates, run regular payroll audits, remediate any underpayments identified and back-pay affected employees, maintain accurate records and payslips, and self-report significant underpayments to the Fair Work Ombudsman. Eligible small businesses can rely on the Voluntary Small Business Wage Compliance Code, and employers of any size can enter a cooperation agreement with the FWO to avoid criminal prosecution for specified conduct. Easy speak-up pathways for staff to flag anomalies in their own pay are an early-warning mechanism that helps catch issues before they escalate.

How do workers report suspected wage theft?

Workers can report to the Fair Work Ombudsman by phone (13 13 94) or through an anonymous report online. Workers should provide as much information as possible, including employer details, their own employment details, the alleged underpayment, and supporting evidence like payslips. Raising the issue directly with the employer first is often worth trying, since many errors are genuine and are promptly corrected. Union members can also seek assistance from their union. Only the police or the Commonwealth DPP can bring criminal proceedings; the FWO investigates and refers matters where the criminal threshold is met.

What is the most common form of wage theft?

The most common forms include underpayment of base hourly rates (paying below the minimum wage or the correct award rate), unpaid overtime (not paying penalty rates or expecting unpaid extra hours), unreasonable deductions (for breakages, till shortages, or customer theft), withholding entitlements like annual leave, sick leave, or superannuation, sham contracting (misclassifying employees as contractors), unpaid trial work or internships, and unauthorised deductions for things the employer should provide like uniforms or training. Underpayment of base hourly rates is generally the most common overall, though prevalence varies by industry and workforce demographics.

Criminalising Intentional Wage Underpayments: Fair Work Act

TL;DR

From 1 January 2025, intentional wage underpayment is a federal criminal offence in Australia under section 327A of the Fair Work Act 2009, inserted by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023. The offence covers wages, leave entitlements, superannuation and amounts owed under a salary sacrifice arrangement.
The offence captures underpayments that occur after 1 January 2025 and ongoing underpayments that started before that date. The most common category the Fair Work Ombudsman sees is unpaid overtime.
The offence requires intent, and prosecution requires proof beyond reasonable doubt. Honest mistake and genuine error are outside the criminal offence, though civil penalties still apply for negligent or reckless underpayment, and back-pay obligations remain unchanged.
Maximum criminal penalties are substantial. For individuals, up to 10 years' imprisonment or fines up to A$1,565,000 (5,000 penalty units). For body corporates, fines up to A$7,825,000 (25,000 penalty units). Courts may impose penalties up to three times the underpayment amount where that figure is higher. Penalty unit values are indexed, so these dollar figures rise over time.
The Fair Work Ombudsman investigates and can refer matters to the Commonwealth Director of Public Prosecutions or the Australian Federal Police; only police or the DPP can actually bring criminal proceedings. The Voluntary Small Business Wage Compliance Code and cooperation agreements with the FWO are the main pathways employers can use to demonstrate good faith and avoid criminal prosecution.

What is an underpayment and when is it wage theft?

Wage theft is the deliberate underpayment of employee wages, superannuation, and other employment entitlements. An employer (whether a company or an individual) may commit a criminal offence where they:

were required to pay an employee an amount, such as wages, leave entitlements, superannuation, or under a salary sacrifice arrangement, under the Fair Work Act 2009 or an industrial instrument
intentionally failed to pay these amounts on or before the due date.

The offence applies to:

underpayments that occur after the provisions come into effect
ongoing underpayments that started before 1 January 2025.

The most common type of wage theft is unpaid overtime.

New criminal offence for intentional underpayment

What makes a payment intentional?

Under the new legislation, intentional wage theft constitutes a criminal offence. Intent involves deliberate actions to underpay employees, with penalties applying only when intent can be proven.

Standard of proof

Criminal prosecution requires intent and proof beyond a reasonable doubt.
Civil penalties apply for negligence or recklessness without intent.

Importantly, “intentional” can also be imputed based on the conduct of an employer. This means an employer may be considered to have engaged in intentional wage theft even if they didn't mean to underpay employees. For example, conduct may be deemed intentional if the employer's actions (or failure to act) were deliberate and resulted in underpayment, regardless of their asserted intentions.

Voluntary Small Business Wage Compliance Code

To support businesses, the Voluntary Small Business Wage Compliance Code was introduced alongside a guide provided by the Fair Work Ombudsman. The Code is not a checklist; businesses do not need to meet all factors for compliance. However, it offers a framework to:

help identify and correct unintentional underpayments
protect businesses from criminal prosecution if they demonstrate compliance with the Code.

While it was designed for small businesses it can be used by organisations of any size.

Key points assessed under the Code include:

taking reasonable steps to work out correct pay rates and entitlements
staying up to date with changes in workplace laws
relying on accurate employee information for payroll
seeking advice from reliable sources when needed
fixing underpayments promptly and preventing recurrence
cooperating with inquiries or investigations.

More details, including a checklist and practical tips, are available in the Fair Work Ombudsman’s guide. Guide to Paying Employees Correctly and Voluntary Small Business Wage Compliance Code

Penalties in the new wage theft laws

The following criminal and civil penalties may apply:

Criminal penalties

Individuals: Up to $1,565,000 in fines or 10 years imprisonment.
Companies: Up to $7,825,000 per offence.

Courts may impose penalties up to three times the amount of the underpayment if higher than the maximum fine.

Civil penalties

Increased for "serious contraventions" by companies with 15 or more employees.
The threshold for "serious contraventions" now includes knowing or reckless conduct.

Fair Work Ombudsman powers

The Fair Work Ombudsman has been granted expanded powers to:

investigate wage theft and enforce compliance
issue compliance notices requiring employers to calculate and back-pay underpayments
refer criminal matters to the Commonwealth Director of Public Prosecutions (DPP) or the Australian Federal Police for prosecution.

Note: Only the police or DPP can bring criminal prosecutions.

Self-reporting and cooperation

To encourage accountability, employers who voluntarily disclose underpayments may:

enter cooperation agreements with the Ombudsman to avoid criminal prosecution for specified conduct
use the Small Business Wage Compliance Code to demonstrate good faith in resolving errors.

Employer action required

To comply with the new laws and avoid penalties, employers should:

review and update employee classifications and pay rates
regularly audit payroll systems for errors
correct any identified underpayments and back-pay affected employees promptly
self-report underpayments to the Ombudsman and seek a cooperation agreement
adopt the Voluntary Small Business Wage Compliance Code if applicable
maintain accurate employee records and payslips
stay updated on any future legislation changes.

While honest mistakes can occur, employers must act swiftly to correct underpayments and seek professional advice if unsure.

Summary

The criminalisation of wage theft highlights the importance of fair pay practices. Businesses must take proactive steps to ensure compliance with workplace laws to avoid severe penalties. Employers who act responsibly by addressing underpayments, cooperating with investigations, and staying informed can significantly reduce legal risks.

For further resources, visit the FWO website.

Elker's connection with the topic

Staff who report pay anomalies internally provide the organisation with an important safety net. For this to happen, it's important to encourage staff to check their pay and provide an easy way for them to speak up (anonymously or with a name) to have any anomalies checked early.

We partner closely with our clients to provide central pathways and anonymous reporting tools. We also develop analytics dashboards that show trends early and clearly.

Through our work across diverse industries, we've seen firsthand the importance of thoughtful, strategic implementation when it comes to encouraging staff to report concerns. With Elker, you'll have a trusted partner to help you navigate the complexities, develop a tailored plan, and embed ethical practices within your organisation's DNA.

Ready to build a better workplace? Book a call today.

Key takeaways

The offence is federal and sits alongside existing state wage theft laws (for example Victoria's Wage Theft Act 2020 and Queensland's provisions), which continue to operate in parallel.
"Intentional" can be imputed from conduct. An employer whose actions or inaction are deliberate and result in underpayment can be treated as having intended that result, even while claiming otherwise.
The Voluntary Small Business Wage Compliance Code is not a checklist. Small businesses do not need to meet every factor, and the Code can be used by organisations of any size to demonstrate good faith, prompt remediation and cooperation.
Civil penalty thresholds for "serious contraventions" now extend to knowing or reckless conduct for companies with 15 or more employees, so even below the criminal threshold, exposure has increased materially.
A functioning speak-up channel is a practical compliance asset because pay anomalies are most often spotted by workers and line managers before payroll or HR notices the pattern.

Frequently asked questions

Sources

Fair Work Act 2009 (Cth), s 327A (criminal wage underpayment offence)
Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth)
Fair Work Ombudsman, Guide to Paying Employees Correctly and Voluntary Small Business Wage Compliance Code (December 2024)
Fair Work Ombudsman, Criminalising wage underpayments and other issues (guidance page)
Wage Theft Act 2020 (Vic), continuing state offence
Commonwealth Director of Public Prosecutions, prosecution policy

Criminalising Intentional Wage Underpayments Under the Fair Work Act