The National Road Freight Transport Association (NatRoad) has issued an urgent warning to the Federal Government over what it calls “rampant illegal employment practices” that are undermining legitimate road transport operators and threatening road safety across Australia.
NatRoad Chief Executive Officer Warren Clark told a government roundtable that sham contracting has become so entrenched in the sector that some companies are now openly advertising for “employee drivers with ABNs” on mainstream job sites such as Seek — clear evidence, he said, that “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,” Clark said. “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.”
The cost of sham contracting
NatRoad estimates that sham contracting provides an artificial cost advantage of 20–30% for operators avoiding employment obligations such as payroll tax, superannuation, GST registration and workers’ compensation insurance. This practice is eroding the competitive base for compliant companies and costing the government billions in lost tax revenue.
The association said drivers are increasingly approaching legitimate operators requesting ABN payment arrangements, admitting that “this is how other transport companies operate.”
Such arrangements allow drivers to be misclassified as independent contractors, even when they drive company trucks, follow company schedules and work fixed hours — a clear breach of employment law.
Evolving and sophisticated schemes
NatRoad has identified new layers of complexity designed to disguise employment relationships, including:
- Labour-hire façades — entities that convert employees into ABN holders while continuing to direct their day-to-day work.
- ABN sharing rings — networks where one ABN is used across multiple drivers, avoiding tax, superannuation and reporting requirements.
Clark said these schemes can be created and dissolved almost instantly, making enforcement extremely difficult.
“If you need immediate money, this is a great way to make a quick buck with no obligations to anyone,” he said.
Safety and workforce impacts
The association warned that cost-cutting pressures from illegal contracting are forcing drivers into unsafe working conditions and fuelling a race to the bottom on rates.
“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,” Clark said.
The issue comes at a time when Australia is facing a national driver shortage and an increase in road incidents over the past two years — further intensifying concerns about fatigue, compliance and training standards in the sector.
Legitimate operators under pressure
NatRoad argues that the growing shadow economy is driving compliant operators out of the market.
“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 at a time when we desperately need them,” Clark said.
Failures in enforcement
NatRoad highlighted multiple weaknesses in current enforcement frameworks, including:
- Audits that are rarely conducted and easily avoided
- Penalties that fail to deter
- Under-resourced regulatory agencies
- Increased scrutiny on compliant businesses instead of fraudulent ones
Clark compared the current system to “telling an Olympic team steroids aren’t allowed then never testing them.” Once operators realise they can avoid detection, he said, non-compliance quickly becomes normalised.
NatRoad’s call for urgent reform
The association is calling on the Federal Government to act immediately by:
- Launching comprehensive industry audits targeting non-compliant operators
- Imposing personal liability on directors who facilitate sham contracting
- Disqualifying non-compliant companies from government contracts
- Following up on whistleblower reports
- Refocusing the Shadow Economy Taskforce on the transport sector
“Until 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,” Clark said.
“The message right now is clear: breaking the law is more profitable than following it. That has to change.”
Industry context
With heavy vehicle compliance falling under the National Heavy Vehicle Regulator (NHVR) for vehicles above 4.5 tonnes GVM, the regulator’s mandate is to inform, educate and enforce under the Heavy Vehicle National Law to improve safety and productivity across the national freight network.
However, NatRoad’s latest warning suggests that stronger inter-agency collaboration — particularly between tax, workplace and transport regulators — will be essential to close loopholes that allow sham contracting to persist at scale.
