Industrious Conversations: Final Report of the Closing Loopholes review

Shelley Williams
Hello and welcome to Ashurst Perkins Coie’s Legal Outlook, and the next episode in our Industrious Conversations series, bringing you insights into workplace developments in Australia from our leading Employment team at Ashurst Perkins Coie.

I’m Shelley Williams, a partner in our Employment Practice, based in Brisbane, and I’m delighted to be joined by Peter McNulty, my colleague and also a partner in our Employment Practice in Melbourne.

In this episode, we’ll be talking about the Final Report of the Closing Loopholes review and what its recommendations mean for employers. We’ll also touch on the Labor Party’s 2026 draft National Platform and what it signals for workplace relations in Australia.

Peter McNulty
And Shelley, a “spoiler alert” in terms of the Closing Loopholes review: not much good news.

I think the Loopholes review really recognises that there are significant burdens and complexities arising from this new legislation, but for the large part, recognises that that was the intent of the scheme - these changes were designed to impose greater burdens on employers.

Other than those sort of findings, the Report really does a couple of things: it says it’s too early to tell whether the particular reforms are working or not, and recommends reviews be undertaken in a year or further down the track, or it makes recommendations which, on paper, look like they could be really helpful for employers, but frankly, we think they’re going to be pretty difficult to implement in practice.

Before we get into that, it’s probably worth just reminding our listeners what these Closing Loopholes reforms actually entailed.

Shelley Williams
That’s right, Peter. The Closing Loopholes reforms were introduced following the enactment of two pieces of Federal legislation passed in late 2023 and early 2024, together representing what were really the most significant amendments to the Fair Work Act since the Secure Jobs, Better Pay amendments, and those changes have really been rolling out since December 2023 through to August 2025.

Peter McNulty
And as you’ve mentioned, Shelley, they are really broad-ranging reforms as well, ranging from wage theft criminalisation, same job/same pay, a new casual employment definition, “employee” and “contractor” definitions, the right to disconnect, and a whole new regime for “employee-like” workers, and standards by which those workers would be governed as well.

Shelley Williams
That’s right, and part of that legislative reform included this mandatory review of the provisions and whether they were achieving their intended purposes. So the independent statutory review was completed in June 2026 by Susan Booth, with the Final Report tabled in Parliament on 20 August 2026, and that review informs much of our discussion.

We’ve chosen to focus on three key areas of the Report we think would be of most interest to all of our listeners. There’s obviously, as Peter mentioned, a number of different areas covered in the Report, but we thought wage compliance and wage theft reforms is always an interesting topic for employers, and one that garners significant attention in Australia. The "employee" definition changes are the second topic, and then we saved the best for last, which is intractable bargaining and the “no less favourable” test. So let’s get into those three areas, Peter.

Peter McNulty
Absolutely, Shelley. I think the commentary on the “no less favourable” test is probably where there is one glimmer of hope for employers coming out of the review. So we’ll keep that until last.
The first issue that we wanted to focus on is wage compliance, something that’s been really significant for a number of employers across Australia in the past few years, and one of the reforms included in the Closing Loopholes regime was the criminalisation of wage theft.

Now the Report looks at that and effectively says there haven’t been any prosecutions on that front. But it makes two recommendations relating to wage compliance.

The first is that the Fair Work Ombudsman (FWO) should receive funding to develop practical guidance tools such as interactive calculators and decision support systems.

The second is the Government should develop compliance tools in collaboration with industry, which can be integrated into employer payroll software.

Now, that all sounds fantastic - I’m sure we and all of our clients would love those sorts of compliance tools to be readily available. I think, in practice, what we’ve seen from advising on a number of these types of issues is that just taking the words of a particular instrument isn’t that instructive, and actually trying to contemplate every iteration of a particular working pattern or arrangement that an employer may have is where those complexities arise in practice.

So we really can’t see those matters and those recommendations coming to fruition anytime soon in a way that would meaningfully allow employers to ensure compliance with their obligations. But we should probably also discuss, Shelley, why these wage compliance obligations are a focus under the Closing Loopholes reforms as well.

Shelley Williams
That’s right. So if we take a step back and look at the legislative regime that was introduced, and it was back in January 2025 that it became a criminal offence under the Fair Work Act to intentionally underpay an employee’s wages. The penalties were significantly increased, and they include up to 10 years' imprisonment for an individual who’s involved in the contravention, and the higher of three times the underpayment, or $8.25 million in fees for a corporation, or $1.65 million for an individual, whichever is higher.

The offence covers intentional underpayments, which really is a failure to pay a required amount, which includes wages, allowances, superannuation, and leave entitlements owed to an employee or a group of employees under the Fair Work Act.

The independent review found that there have been no criminal prosecutions that have been finalised, which obviously makes it difficult to make any conclusions about how the provisions are working. But prosecuting wage theft to a criminal standard beyond reasonable doubt is fundamentally different to pursuing a civil penalty case. It’s obviously significantly resource intensive, and the Fair Work Ombudsman already has a significant caseload.

So, those are some of the observations that came out of the Report. The Report acknowledges that employers would benefit from that additional support that you spoke about, Peter, and those practical tools. But I think it’s fair to say that some of what’s been suggested - the digitalisation of the tools, and the idea that they could be Government tools which interact with payroll software and payroll software providers - raises some quite far-reaching practicalities: Who’s liable for the tools? Who reviews or quality assesses the accuracy of the tools? Those are just some of the challenges I think that exist coming out of that part of the recommendations.

Peter McNulty
I think one of the useful things that the Closing Loopholes review does is provide statistics on how many applications have been made in particular spaces.
In this context, the Report says that the FWO has considered 42 matters for potential investigation into suspected criminal conduct, with five ongoing operations and a further 12 matters under assessment. That’s in the time since January 2025.

That provides a useful indication of the FWO’s consideration of these matters as really the most serious and most egregious examples of deliberate misconduct as well.

The other thing to note is this is one of those categories of review where the review has recommended that another review be done in 12 months’ time, given there have been no prosecutions to date.
The second issue that we thought it was worth discussing, Shelley, is the employee/contractor definition reforms. And for context, those reforms were introduced in response to the High Court’s 2022 decisions, which really focused on the primacy to be given to the written terms of the contract in determining worker status. And if the contract in writing was complete and made clear that a worker was a contractor, that could be relied on and was the determining factor.

Now, obviously, the new employee definition in the Fair Work Act reverts to a multifactorial test, assessing the real substance, practical reality and true nature of an employment relationship, which means the assessment isn’t just about the written terms of the contract, but how it applies in practice, and even how it evolves over time.

And we’ve seen some recent case law starting to analyse what that means in practice for employers - and even where the terms of a contract say that a person is an independent contractor, and even where that person is relatively well paid - that may not be enough in circumstances where the real substance and the practical reality of those arrangements, having regard to that multifactorial test, is such that that person could be deemed to be an employee.

The review has acknowledged that this is an ongoing, evolving assessment, and not being able to rely on the words of the contract has created real uncertainty for employers and real burdens, particularly on those fringe cases, and requires employers to continue to make that assessment throughout the life of a relationship.

But again, the review notes that this is in fact what was intended - therefore, to that extent, it is working. Now, one of the more controversial recommendations, which was included in the draft report - and subject to a lot of scrutiny - was a recommendation that the definition of employee in the Fair Work Act then be rolled out more generally, where the employment relationship is defined in other legislation as well, such as tax legislation, superannuation, and so on.

Now, while consistency may be a noble aim, what is clear for us is that employers are operating on the basis of these definitions as they currently apply, and that may cause some real concern as well in terms of broadening of that concept, particularly when we’re talking about things like taxation and superannuation - that rolling in of continuous assessment might really add to the complexity of those burdens as well.

Shelley Williams
In terms of that consistency, there are so many different legislative regimes - you’re looking at Commonwealth and state-based tests across tax and superannuation, workers’ compensation, and long service leave, which means that a worker can be classified differently depending on those regimes, and each of them, of course, have their own jurisprudence that sits around those legislative regimes.
So, creating truly nationally consistent definitions is going to be no small feat. One of the recommendations that came out of the report was that the Fair Work Ombudsman could prepare a checklist to determine whether a worker is an employee or a contractor, and attempt to get some consistency in at least that sort of checklist format. Whether we actually see that be implemented, only time will tell.

Peter McNulty
And then, Shelley, maybe leaving the best till last…
One of the other amendments that the Closing Loopholes reforms made was to alter the intractable bargaining regime that had been included under the Secure Jobs, Better Pay reforms. It’s probably worth just going through what those changes were, and then we can unpack the recommendations on that front.

Shelley Williams
That’s right. So the intractable bargaining framework was introduced, as many of our listeners would recall, under Secure Jobs, Better Pay, and Closing Loopholes No. 2 added what was the no less favourable constraint - meaning that when the Commission arbitrates a workplace determination, the terms (other than wages) can’t be less favourable to employees than the existing enterprise agreement term.

This was, and is, a significant safeguard for employees. So essentially, what it means is that they can’t go backwards through a Fair Work Commission arbitrated outcome.

But from an employer perspective, it fundamentally alters the bargaining dynamic, where the worst case for employees is essentially the status quo. The pressure shifts quite considerably, so employees may be less inclined to make concessions during bargaining, knowing that if the matter proceeds to arbitration, terms can’t fall below the current enterprise agreement.

Peter McNulty
And there’s been a number of cases in the Fair Work Commission considering this intractable bargaining regime, and a concern that’s been raised by a number of employers in those cases is that sort of perverse incentive for unions and employees to hold out and wait for intractable bargaining, rather than make a compromise.

So whereas the stated aim of this reform of the no less favourable test was intended to ensure that employers couldn’t hold out and wait for intractable bargaining, in fact what has happened in practice is quite the opposite: you now see the reverse effect, with unions and employee representatives possibly holding out, because they know that if they get to intractable bargaining, it will be the status quo plus anything else on top, and there are no losers really in that situation.

Shelley Williams
That’s right. It stemmed from the Ulan decision, where that sort of bargaining strategy on the part of employers was really set out, and the introduction of this part of the Closing Loopholes provisions - this no less favourable constraint - was really to try and counter that strategy being implemented.

But really the pendulum has absolutely swung. So it is positive that it’s being called out in the Report - that’s good news, as we’ve talked about. It’s said to be having that unintended consequence to what Parliament intended.

Peter McNulty
In terms of what that recommendation looks like in terms of legislative reform, it involves including a number of other criteria that the Fair Work Commission must have regard to in determining whether to make an intractable bargaining declaration. This is to ensure that the strategy of just “sitting on your hands” and waiting for that declaration to be made can be taken into account by the Fair Work Commission, and is a factor that tends against the making of an intractable bargaining declaration.

So we’ll wait and see if that becomes a priority area of focus. I don’t think we’re holding our breath just yet.

Shelley Williams
Alright. Before we wrap up, it’s worth briefly mentioning the Labor Party’s 2026 draft National Platform, which signals the policy direction heading into the next election.
There were a couple of key themes that came out of the National Platform. It includes a commitment to full employment with targeted support for disadvantaged workers, and this is a theme that was also picked up in the final review Report - there’s obviously that shared theme across the Closing Loopholes review. There’s productivity gains from AI, and automation, and that’s something that we’re obviously talking about a lot with our clients. Peter, were there a couple of other things that you wanted to touch on?

Peter McNulty
There are a few: There’s an implicit acknowledgement in the draft Platform that there won’t be a national labour hire licensing scheme, and that rather the Commonwealth will work with states and territories to achieve consistency so far as they’re able.

I think then there’s also a focus on portability of entitlements, including through industry-wide schemes, and it seems like that’s not necessarily limited to long service leave either. So I think that’s something to watch.

The other thing that I’d observe in terms of these platforms is that they’re often quite aspirational documents in terms of what political parties hope to achieve. When you go back and look at the 2023 platform of the Labor Government, what you’ll see is they have been very successful in implementing a number of the measures that were included in that platform. So, I think we really have to look carefully at what’s in this 2026 platform as a roadmap for the next few years not just a list of aspirations which may or may not eventuate in the future so it is something worth looking at for employers, to see what's coming down the track..

Shelley Williams
Absolutely, and the only other theme that I’d call out is the continued focus on workplace health and safety, including psychosocial hazards, which was also a key theme of the review - but I think we could do a podcast on that topic all by itself!

Peter McNulty
Excellent. Well, look, I think there’s still a lot more to come. While these legislative reforms have now sort of bedded down, what we’re seeing is that how those reforms apply in practice is still being worked through, and will be the subject of ongoing review over the next couple of years. So certainly a lot more to look out for in that space.

Thank you for listening to this episode of Industrious Conversations on Ashurst Perkins Coie Legal Outlook. To hear more Ashurst Perkins Coie podcasts, and to ensure you don’t miss any future episodes in our Industrious Conversations series, subscribe now on Apple Podcasts, Spotify, or your favourite podcast platform. Also, please do reach out to our Employment team if you’d like to discuss this topic more.

We hope you’ll join us next time as we continue to explore key workplace developments in Australia and hear insights from other members of our leading Employment team here at Ashurst Perkins Coie. Until then, thank you for listening, and goodbye