Understanding the Criminalisation of Wage Theft

‍

Wage Theft in Australia: What Every Business Owner Needs to Know in 2025

Understanding the Criminalisation of Wage Theft

From 1 January 2025, intentional underpayment of staff wages, superannuation, and leave entitlements is a criminal offence under the Fair Work Act. This means wage theft is no longer just a compliance issue. It now carries criminal penalties, including fines and imprisonment.

For businesses, this signals a major shift in how payroll compliance is enforced. Fair Work and the Australian Taxation Office (ATO) will monitor wage and superannuation payments more closely, with tougher penalties for non-compliance.

What Counts as Wage Theft?

Wage theft occurs when an employer deliberately underpays staff. This can include:

• Paying below the award or agreed rate of pay
• Withholding superannuation contributions
• Failing to pay annual leave, sick leave, or long service leave entitlements
• Not paying overtime or penalty rates when required
• Deducting unauthorised amounts from employee wages

The law draws a clear line between honest mistakes and deliberate avoidance. Businesses need strong systems in place to avoid falling into either category.

Criminal Penalties for Wage Theft

The penalties for wage theft are severe.

• For companies: The greater of three times the underpayment amount or $8.25 million.
• For individuals (sole traders, directors, business operators): The greater of three times the underpayment or $1.65 million, plus up to 10 years in prison.

These penalties show that wage theft is treated as a serious offence, on par with financial fraud.

Honest Mistakes vs Intentional Underpayment

The law recognises the difference between an honest calculation error and deliberate wage theft.

• Honest mistakes: Miscalculating pay rates, super contributions, or leave entitlements due to genuine error. These are not considered criminal offences but still need to be rectified.
• Not excused: Missing or delaying superannuation payments, failing to track overtime, or ignoring employee entitlements. Late or unpaid super is one of the most common compliance breaches and is treated as wage theft.

Why Superannuation is a Hotspot for Compliance

Superannuation is one of the biggest problem areas for Australian businesses. Many employers pay it late or fall behind during cash flow shortages. Under the new rules, late super is wage theft.

Businesses will now face:

• ATO penalties and interest for missed super payments
• Fair Work penalties for wage theft breaches
• Reputational damage among staff and customers

Paying super on time, every quarter, is no longer optional.

The Broader Impact on Business Owners

These changes create significant risks for business owners. Non-compliance could lead to:

• Loss of business reputation
• Increased Fair Work audits
• Higher operating costs due to penalties and back payments
• Criminal charges for individuals

Directors and business owners must understand their personal liability. Even if you operate through a company, you can still face individual penalties if involved in underpayment.

How to Stay Compliant with Payroll and Super

To avoid wage theft charges, businesses should implement strong compliance systems.

Practical steps include:

• Audit your payroll: Review current wage and super payments to ensure compliance with awards and enterprise agreements.
• Use accounting software: Xero, MYOB, or QuickBooks can automate payroll calculations.
• Pay super on time: Set up automated clearing house payments before the quarterly due dates.
• Track leave entitlements: Record all employee leave accruals accurately.
• Review employment contracts: Ensure contracts reflect the correct award or enterprise agreement.
• Keep detailed records: Maintain clear payroll, timesheet, and superannuation records for at least 7 years.

The Role of Accountants and Advisors

Small and medium businesses often struggle with payroll compliance. Accountants and tax agents provide vital support in:

• Setting up payroll correctly
• Reviewing super and leave entitlements
• Conducting payroll audits
• Advising on award compliance
• Lodging reports with the ATO and Fair Work

Working with a professional reduces the risk of errors and protects business owners from heavy penalties.

The ATO and Fair Work’s Increased Powers

From 2025, both the ATO and Fair Work will have greater power to investigate underpayments. Data-matching programs between Single Touch Payroll (STP), superannuation funds, and tax records will make it easier to identify non-compliance.

If discrepancies are found, Fair Work inspectors can:

• Launch audits
• Demand records and payslips
• Issue infringement notices
• Commence prosecutions for criminal wage theft

Common Traps That Lead to Wage Theft

Business owners often fall into compliance traps without realising. Some common issues include:

• Paying staff on a flat rate without considering overtime or penalty rates
• Incorrect classification of employees under the award system
• Paying cash-in-hand without super or entitlements
• Failing to update pay rates when awards change
• Missing deadlines for superannuation contributions
• Misclassifying employees as contractors to avoid entitlements

Why Wage Theft Laws Are Tougher Now

The government has introduced these reforms after years of wage underpayment scandals involving major Australian businesses. Public pressure demanded stronger laws, and now wage theft is officially criminalised.

The aim is to:

• Protect employees’ rights
• Create a level playing field for businesses that comply
• Deter deliberate underpayment by increasing penalties

Consequences Beyond Penalties

Apart from fines and imprisonment, wage theft carries other business consequences:

• Employees can lodge claims with Fair Work
• Class actions may arise from systemic underpayments
• Media and public scrutiny can damage reputation
• Staff turnover increases when trust is broken

For small businesses, these consequences can be fatal.

How Trinity Accounting Practice Helps You Stay Compliant

At Trinity Accounting Practice, we help businesses reduce risk and meet their obligations under the Fair Work Act. Our services include:

• Payroll setup and compliance reviews
• Superannuation payment monitoring
• Award classification guidance
• Single Touch Payroll reporting
• Bookkeeping and record-keeping support
• Tax and ATO compliance advice

We work with trades, construction, medical practices, childcare centres, restaurants, and small businesses across Sydney and beyond.

Taking Action Before It’s Too Late

If you are unsure about your compliance, act now. Waiting until an audit or employee complaint is too late.

Steps you should take immediately:

• Review staff contracts and pay rates
• Check superannuation contributions are up to date
• Conduct an internal payroll audit
• Seek professional advice from an accountant or advisor

Being proactive protects your business and staff.

Final Thoughts

Wage theft laws from 1 January 2025 mark one of the biggest shifts in Australian workplace law. Underpaying staff is no longer a simple error to fix later. It is a criminal offence with heavy penalties.

Business owners must take payroll and super obligations seriously. The best defence is compliance, supported by strong systems and expert advice.

👉 Trinity Accounting Practice
✅ Accounting Firm in Beverly Hills
☎️ 02 9543 6804
📍 159 Stoney Creek Road Beverly Hills NSW 2209
🌐 www.trinitygroup.com.au
📅 Weekend & after-hours appointments available!
📅 Booking Link https://calendly.com/ramy-hanna.

‍

‍

‍