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Closing the Loopholes legislation: the who, what & why

Big changes are here: If you're a small business owner, here's what you need to know.

First and foremost, wage theft is now a criminal offence.

What this means: If a business knowingly and intentionally underpays wages or entitlements, it can lead to criminal charges, with penalties including fines and even imprisonment.
Who it applies to: All employers, but small businesses that act in good faith have some protections under the Voluntary Small Business Wage Compliance Code.
What you should do: Ensure your payroll processes are accurate, review past payments, and fix any errors immediately.

Employees now have the ‘Right to Disconnect’.

What this means: Employees can refuse to answer work-related calls, emails, or messages outside of work hours unless it’s an emergency.
Who it applies to: Larger employers (15+ employees) from August 2024, but small businesses get a one-year grace period until August 2025.
What you should do: Start setting clear policies now on expected work hours and communication boundaries.

There are changes to casual employment rules.

What this means: The definition of a casual employee is changing. A worker is only a casual if there is no firm advance commitment to ongoing work.
Who it applies to: All businesses that employ casual workers.
What you should do: Review casual contracts and ensure they reflect the new rules. Employees who no longer fit the casual definition may be entitled to permanent roles.

We have clarity on the difference between an employee vs contractor.

What this means: Businesses can no longer rely solely on written contracts to determine if a worker is a contractor. Courts will now look at how the working relationship actually operates in practice.
Who it applies to: Any business using independent contractors.
What you should do: Review contractor agreements and work arrangements to avoid potential misclassification risks.

For small businesses juggling payroll compliance with limited resources, the government has introduced some protections under the new Code.

The Code gives small businesses (fewer than 15 employees) some breathing room when it comes to wage compliance. If you act in good faith and follow the Code, you won’t face criminal charges for underpayments. That means staying on top of award rates and legislation changes, keeping solid payroll records, reviewing pay rates after Fair Work’s annual updates, and fixing any underpayments fast, while documenting the steps you’ve taken. Want the full rundown? Check out our article on the Code here.

Further, small businesses aren’t held to the same compliance thresholds as larger companies, giving them a bit more flexibility. Civil penalties are lower for small businesses, reducing the financial impact of mistakes. Plus, grace periods offer extra time to adjust—like the right to disconnect, which won’t apply to small businesses until August 2025, a year after larger employers.

Why were these changes introduced?

The Closing the Loopholes legislation is designed to:

  • Increase accountability for wage compliance
  • Strengthen worker protections and prevent underpayments
  • Provide clearer guidelines on employment classifications
  • Ensure fairness between large and small businesses in compliance expectations

With wage theft now a criminal offence, businesses must take payroll compliance seriously. The new laws also aim to close gaps that previously allowed businesses to misclassify workers, delay payments, or avoid penalties.


Support & resources available:

  • Fair Work Ombudsman tools: Online calculators, fact sheets, and advisory services.
  • Industry associations: Many provide templates and legal guidance tailored to small business owners.
  • Payroll audit & compliance services: Using tools like Audit My Payroll’s Compliancer™ can help prevent compliance issues before they arise.

Final steps for small business owners

To stay compliant and avoid unnecessary risks:

✅ Audit your payroll processes to ensure accurate wages and entitlements.
✅ Update casual and contractor agreements to align with the new definitions.
✅ Use payroll compliance tools to avoid costly errors.
✅ Monitor Fair Work updates for any additional changes.
✅ Train staff on new laws to prevent misunderstandings.

By taking proactive steps now, small businesses can avoid penalties, protect their reputation, and maintain compliance stress-free.

For more details, visit the Fair Work Ombudsman’s website or check out Audit My Payroll for compliance solutions.

Contact Audit My Payroll today to find out how we can help future-proof your payroll and protect your business: