A labour hire licence is no longer a box to tick.
In Australia, the Labour Hire Authority (LHA) continues to expand enforcement in high risk industries, issued warnings, cancelled licences, and refused applications. Recent legislative changes have strengthened the LHA’s information gathering powers, including its ability to obtain documents from third parties such as other regulators or professional advisors.
That matters because scrutiny does not sit with the LHA alone.
The Australian Taxation Office (ATO), the Fair Work Ombudsman (FWO), and Home Affairs and the Australian Border Force are also focused on labour hire arrangements. For labour hire firms, tax, superannuation, award compliance, record keeping, and worker classification now sit in the same risk frame.
Why labour hire businesses are under more pressure
The LHA can refuse, condition, suspend, or cancel a licence where there are issues with compliance, misleading information, or whether relevant persons are fit and proper. It has also said openly that it is refusing licences where businesses or the people running them are not compliant with legal obligations, including taxation, superannuation, occupational health and safety, migration, and labour hire laws.
As a result, licence risk now extends well beyond the application process.
If a regulator identifies concerns in one area of the business, those concerns may have consequences across the licensing position, the broader compliance profile, and the ability to keep operating.
ATO scruitiny is part of the picture
The ATO makes clear that labour hire firms must withhold tax from payments to both employees and independent contractors in labour hire arrangements. It also states that labour hire firms are responsible for PAYG withholding, superannuaton, and fringe benefits tax obligations in these arrangements. In addition, a contractor who is paid mainly for their labour may still attract superannuation guarantee obligations.
If a labour hire business gets worker characterisation wrong, the exposure can move quickly.
The issue is not only payroll processing. It is whether the business has set up the arrangement correctly from the start.
Fair Work Ombudsman compliance remains central
The FWO says businesses in labour hire and supply chains must ensure workers receive the correct minimum entitlements under workplace laws. It also warns host businesses that those contracting labour that underpayment and supply chain risks can flow through the arrangement. Its current guide to labour hire and supply chains focuses on practical compliance with the Fair Work Act 2009 (Cth), modern awards, and enterprise agreements.
There is an added layer. Labour hire changes under the Closing Loopholes reforms allow labour hire employees, unions, and hosts to apply for regulated labour hire arrangement orders dealing with protected rates of pay.
That means labour hire providers should not assume old pricing models, old contract structures, or old pay settings will still hold.
The real risk
The real risk is not just refusal of a new licence.
The real risk is that one compliance issue exposes several others at once. A tax issue can point to worker classification problems. A pay issue can expose pricing flaws and modern award risk. A governance issue can raise fit and proper concerns. With the LHA’s strengthened information powers, and overlapping ATO and FWO obligations, it is clear that regulators are better placed to connect those dots.
What labour hire businesses should review now
Labour hire businesses should review five things now.
- Licence applications and licence details should be accurate, current, and consistent with the real operating structure. The LHA recently reminded providers that keeping licence details up to date is a critical compliance obligation.
- Worker characterisation should be checked carefully. If the business treats people as contractors when the law points the other way, tax and superannuation risk can follow.
- Pay rates, modern award coverage, and enterprise agreement exposure should be reviewed. Labour hire arrangements often fail at the point where pricing does not support lawful pay.
- Record keeping and payroll controls should be tested. Regulator scrutiny becomes harder to manage when the underlying records are poor. This is an inference based on the ATO’s withholding and superannuation rules and the FWO’s supply chain compliance guidance.
- Directors and decision-makers should treat licence compliance as an ongoing governance issue, not a one off filing exercise. The LHA’s published approach shows that who runs the business, how the business operates, and whether legal obligations are met all matter to licensing outcomes.
Final word
Labour hire businesses now operate in a tighter regulatory environment. The LHA is scrutinising licence holders and applicants more closely. The ATO and FWO are also focused on how labour hire businesses classify workers, manage payroll, and meet workplace obligations.
If your business has not reviewed its licence position, contracts, payroll setting, and compliance systems recently, now is the time.
Maguire Legal advises labour hire businesses on licensing risk, regulatory scrutiny, compliance reviews, and response strategies. If you need to protect your licence or strengthen your labour hire framework, contact us.