Our reporting into sham contracting in the road transport industry has been cited in two parliamentary committee hearings as evidence that government agencies are finally working together to tackle the long-running issue.
During a Senate Estimates hearing of the Economics Legislation Committee on June 4, Senator Deborah O’Neill tabled a Big Rigs article published on May 22, which detailed growing compliance activity targeting operators allegedly using sham contracting arrangements.
Referring directly to the story, Senator O’Neill quoted comments from Senator Glenn Sterle, who said the mood among industry participants had shifted dramatically since agencies began coordinating their efforts.
Australian Taxation Office Commissioner Rob Heferen told the committee that sham contracting occurs when an employer incorrectly represents a worker as an independent contractor when, in reality, they are functioning as an employee.
He said the practice can be used to avoid obligations such as tax withholding and superannuation payments, while other aspects, including workplace protections and leave entitlements, fall under the jurisdiction of the Fair Work Ombudsman.
The hearing also reinforced the multi-agency approach that has emerged following transport industry roundtables convened by Senator Sterle.
Of particular interest to transport operators was evidence outlining how new technology and reporting systems will make it increasingly difficult for non-compliant businesses to avoid detection.
ATO Second Commissioner Jeremy Hirschhorn told the committee that one of the agency’s most powerful tools is the Taxable Payments Reporting System, which already applies to the road freight industry.
Under the scheme, businesses that engage contractors must report payments made to those contractors to the ATO.
That data is then matched against tax returns and other information sources, allowing the ATO to identify contractors operating within the system and detect potential anomalies.
Hirschhorn said the reporting regime provides the agency with hard payment data that can be cross-referenced with visa records, tip-offs and other intelligence sources when assessing whether a purported contractor may in fact be an employee.
The committee also heard that the introduction of Payday Super from July 1 will significantly strengthen compliance efforts.
Under Payday Super, employers will be required to pay superannuation at the same time as wages, providing the ATO with near real-time visibility of whether workers are receiving their correct super entitlements.
Hirschhorn described the reform as a “game changer”, saying it would allow the ATO to triangulate contractor payment data, superannuation records and other intelligence to identify suspicious arrangements more quickly.
During an earlier Senate Estimates hearing this month, the Fair Work Ombudsman revealed it has 90 active investigations underway into alleged sham contracting and worker misclassification in the road transport industry.
The latest figures were disclosed after questions from Labor Senator Josh Dolega, who also referenced recent Big Rigs reporting in the Education and Employment Legislation Committee.
Fair Work Ombudsman (FWO) Anna Booth told the committee the regulator was actively investigating a number of transport businesses, with the road freight sector a key focus.
Operations Group Manager Michael Campbell said the regulator had also written to 45 entities of interest warning them about concerns within their supply chains and signalling further action.
Investigators have also issued four compliance notices relating to potential underpayments and five infringement notices for job advertisements offering rates below the minimum wage.
Campbell said the FWO office was conducting site visits and interviewing drivers to determine the true nature of working arrangements.
“Site visits are an important part of that, particularly when you’re dealing with a mobile workforce,” he told the hearing.
The FWO office is also working alongside the Australian Taxation Office, Australian Border Force and the National Heavy Vehicle Regulator in what Campbell described as a “joined-up approach” to tackling sham contracting and related compliance issues in the trucking industry.