Wage Theft and Underpayment in Australia: The Criminal Offence Explained

Since 1 January 2025, section 327A of the Fair Work Act 2009 (Cth) makes it a federal crime for an employer to intentionally underpay wages or other required amounts. An individual can face up to 10 years' imprisonment; the offence does not capture honest payroll mistakes.

Wage Theft Is Now a Federal Crime

Section 327A of the Fair Work Act 2009 (Cth), inserted by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth), makes it a criminal offence for an employer to engage in conduct that results in a required amount not being paid to, on behalf of, or for the benefit of, an employee in full and on time. A "required amount" covers amounts the employer must pay under the Fair Work Act itself, a fair work instrument such as a modern award or enterprise agreement, or a continuing transitional instrument. The offence commenced on 1 January 2025. It sits alongside, and does not replace, the pre-existing civil underpayment framework: an employer can still be pursued civilly for back-payment and civil penalties for an underpayment that falls short of the criminal threshold, or in addition to a criminal referral for one that meets it.

What "Intentional" Means (and What It Doesn't)

Section 327A(3) sets out the fault elements of the offence. Absolute liability applies to the fact that a required amount was owed and not fully paid, but the conduct that caused the non-payment, and the failure to pay, must each be intentional. This is the feature that separates wage theft from an ordinary underpayment. An employer that misreads a modern award classification, makes a payroll system error, or miscalculates an allowance has committed an underpayment that still must be corrected and can still attract civil penalties, but it has not, without more, committed the section 327A offence, because there was no intention to engage in the conduct that caused the shortfall. What tips a case from a mistake into intentional conduct is a question of evidence: patterns of underpayment continuing after complaints, deliberate misclassification to avoid award coverage, or a conscious decision not to apply a known entitlement all point toward intention in a way a one-off calculation error does not.

Penalties for Individuals and Bodies Corporate

These are maximum penalties for a criminal conviction, set by section 327A(5) and (6), separate from the civil penalty regime that continues to apply to underpayments generally. Prosecutions under section 327A are a matter for the Commonwealth Director of Public Prosecutions, following referral, not something the Fair Work Ombudsman decides on its own.

What the Wage Theft Offence Does Not Cover

Section 327A(2) carves certain amounts out of the criminal offence where the employee or employer is only covered by the Fair Work Act through specific extended-coverage provisions. The carve-out includes superannuation guarantee contributions, amounts referable to long service leave, and paid leave taken because the employee was a victim of crime or attending jury duty or emergency service duties. These amounts are not left unenforced; they are recovered and enforced through other pathways, such as the superannuation guarantee charge administered by the Australian Taxation Office, rather than through a section 327A prosecution.

Voluntary Small Business Wage Compliance Code

The Voluntary Small Business Wage Compliance Code is designed for small business employers, and following it genuinely and in good faith can support a conclusion that any resulting underpayment was not intentional, going directly to the element the criminal offence depends on. It is not a shield against every underpayment claim, and it does not remove the civil obligation to back-pay a shortfall. It functions as a practical route for small employers to show that reasonable steps were taken to get pay right, which is directly relevant to whether the Fair Work Ombudsman refers a matter for prosecution at all.

Self-Reporting and Cooperation Agreements

An employer, including one too large to rely on the small business code, that discovers an underpayment can self-report it to the Fair Work Ombudsman. Doing so, and cooperating with the resulting inquiry, can lead to a cooperation agreement instead of referral for criminal prosecution. A cooperation agreement does not erase the underlying civil liability to back-pay affected employees, but it is a recognised alternative to the criminal pathway for an employer that comes forward rather than being caught after the fact.

Record-Keeping and the Reverse Onus

Employers must make and keep employee records and give pay slips under sections 535 and 536 of the Fair Work Act. Section 557C creates a significant consequence for failing to do so: in proceedings about a contravention of specified civil remedy provisions, including breaches of the National Employment Standards, a modern award, an enterprise agreement, or a national minimum wage order, if the employer failed to keep the required records or give the required pay slips, and cannot show a reasonable excuse, the employer bears the burden of disproving the employee's allegation, rather than the employee bearing the burden of proving it. This reverses the ordinary starting point in a civil claim and reflects that an employer, not an employee, controls whether accurate pay records exist.

How to Recover Underpaid Wages

The practical path for an underpaid worker generally runs through three stages, well short of a criminal wage theft finding. First, raise the shortfall directly with the employer, in writing, referencing the applicable award, agreement or contract term. Many underpayments are resolved at this stage, particularly genuine errors an employer wants to fix once flagged. Second, if that does not resolve it, a complaint can be lodged with the Fair Work Ombudsman, which can investigate, seek a resolution, and in appropriate cases commence its own enforcement action. Third, for smaller claims, an eligible worker can apply to the small claims division of the Federal Circuit and Family Court of Australia or an eligible state or territory court, a simplified, lower-cost process designed for wage recovery claims. A criminal prosecution under section 327A is a separate track, pursued by the Commonwealth Director of Public Prosecutions following referral, and is not something an individual worker applies for directly.

This article provides general information about wage theft and underpayment under Australian Commonwealth workplace law as at 19 July 2026. It is not legal advice, does not take into account your individual circumstances or the terms of any applicable modern award, enterprise agreement or employment contract, and does not account for later legislative or Fair Work Commission developments. For advice about a specific situation, consult a legal practitioner admitted in the relevant Australian state or territory, the Fair Work Ombudsman, or the Fair Work Commission.

Related reading: the Australia employment law hub, Sham Contracting in Australia, Minimum Wage and Pay Rates in Australia, and Casual Employee Rights in Australia.

Frequently Asked Questions

Is wage theft a crime in Australia?

Yes. Since 1 January 2025, section 327A of the Fair Work Act 2009 (Cth) makes it a federal criminal offence for an employer to intentionally engage in conduct that results in an employee being underpaid wages or other required amounts.

Does an honest payroll mistake count as wage theft?

No. The offence requires intention. An honest administrative or payroll error is not wage theft under section 327A, though the employer still has to back-pay the shortfall as a civil underpayment.

What are the penalties for wage theft in Australia?

For an individual, up to 10 years' imprisonment and a fine of up to the greater of 3 times the underpayment or 5,000 penalty units. For a body corporate, a fine of up to the greater of 3 times the underpayment or 25,000 penalty units.

What is the Voluntary Small Business Wage Compliance Code?

It is a code small business employers can follow to help show that an underpayment was not intentional, which goes to the core element of the criminal offence. It does not remove the civil obligation to back-pay affected employees.

Can an employer avoid prosecution by self-reporting an underpayment?

Possibly. An employer that discovers and self-reports an underpayment to the Fair Work Ombudsman and cooperates with the inquiry may be able to enter a cooperation agreement instead of being referred for criminal prosecution.

How do I get my unpaid wages back?

Generally by raising it with your employer first, then lodging a complaint with the Fair Work Ombudsman if that does not resolve it, and, for smaller claims, applying to the small claims division of an eligible court.

Does the wage theft offence cover unpaid superannuation?

No. Section 327A(2) excludes superannuation guarantee contributions, long service leave amounts, and certain paid leave categories from the criminal offence; these are enforced through other mechanisms instead.

What is the reverse onus for record-keeping?

Under section 557C, if an employer failed to keep required employee records or give pay slips and has no reasonable excuse, the employer bears the burden of disproving the employee's underpayment allegation in proceedings, rather than the employee having to prove it.