The National Road Transport Association (NatRoad) said widespread sham contracting is costing legitimate trucking operators 20-30 per cent in competitive advantage, while billions of dollars in tax revenue are lost.
As a result, NatRoad has issued an urgent call to the Federal Government to crack down on rampant illegal employment practices that it says are crippling Australia’s legitimate road transport operators and compromising road safety.
NatRoad CEO, Warren Clark, revealed at a federal government roundtable on 5 November that sham contracting has become so widespread, transport companies are now openly advertising for ’employee drivers with ABNs’ on major job platforms, highlighting government enforcement is ‘essentially non-existent’.
“There is systemic manipulation in the road freight transport industry happening right now, not being detected by government agencies,” said Clark.
“By allowing widespread illegal activity to flourish unchecked, we’ve created a system where lawbreakers prosper while legitimate businesses are punished for doing the right thing.”
NatRoad says the practice of sham drivers involves transport operators classifying employee drivers as independent contractors through Australian Business Numbers (ABNs), enabling them to evade employment law obligations, payroll tax, superannuation payments, GST registration requirements, and workers’ compensation insurance.
This then creates an artificial cost advantage of 20-30 per cent over compliant operators, the peak body said.
“Multiple transport operators report being approached by drivers demanding ABN payment arrangements, openly admitting ‘this is how other transport companies operate’,” Clark said.
NatRoad has identified increasingly sophisticated structures designed to disguise employment relationships, such as:
Labour hire façades: What it calls ‘agencies’ set up solely to convert employees into ABN holders, with some managing 100-plus individuals who drive company trucks, follow company directions, and work set hours, but who are, according to NatRoad, are fraudulently classified as contractors.
ABN sharing rings: Where individual drivers set up as sole traders with an ABN then employ themselves or share the ABNs with others, allowing them to avoid GST registration, skip tax returns, and evade superannuation obligations.
“They can set up and shut down in a moment. If you need immediate money, this is a great way to make a quick buck with no obligations to anyone,” said Clark.
Warren Clark said the cost-cutting pressure created as a result of sham contractors is forcing legitimate drivers into dangerous situations.
“Drivers end up being pushed into ‘contracts’ on low pay, or businesses must drop their contract prices so low to win work, they end up breaking the rules to make up for the shortfall,” said Clark.
This comes as Australia faces a significant driver shortage and road incidents have increased over the past two years, he said.
As a result, NatRoad says legitimate operators cannot compete against businesses operating with 20-30 per cent lower cost bases gained through the illegal schemes.
“Sham contracting is bringing the road freight transport industry into disrepute and results in legitimate hard-working people losing their livelihood, taking all their skill and experience out of the industry when we desperately need them,” said Clark.
NatRoad has identified what it says are multiple enforcement failures including:
- Audits rarely being conducted and are easy to avoid.
- Penalties that fail to deter.
- Under-resourced agencies.
- Legitimate businesses are facing more scrutiny than fraudulent operators.
“This is like telling an Olympic team steroids aren’t allowed then never testing them,” said Clark. “Once a couple of people know they can get away with it, many more start following.”
NatRoad is demanding the Federal Government take immediate action which includes the following measures:
- Launch comprehensive industry audits targeting non-compliant operators.
- Impose personal liability on directors facilitating sham contracting schemes.
- Disqualify non-compliant companies from government contracts.
- Follow up on whistleblower reports.
- Realign and resource the Shadow Economy Taskforce to focus on transport.
“Until the government treats this as the systemic problem it is, compliant businesses will continue to be disadvantaged, workers will be exploited, and billions in public revenue will be stolen by those who know how to work the system,” said Clark.
“The message right now is clear: breaking the law is more profitable than following it. That has to change.”
Read more about NatRoad actions regarding the road transport industry.
