Fair Work Ombudsman
The Fair Work Ombudsman (FWO) presented on their current strategic priorities and connections to the shadow economy, covering:
- Priority sectors include aged care, agriculture and horticulture, building and construction, disability support, fast food, restaurants and cafés, large corporate and universities.
- Collaborative governance arrangements include a peak advisory group providing input on compliance and enforcement policy, and sector-based reference groups, bringing together employers and unions to understand underlying drivers and support practical solutions.
- As part of an adjustment in enforcement posture, the FWO is interested in industry-led certification programs and opportunities for compliance partnerships that support meeting workplace obligations and recognise employers who are doing the right thing.
- Enduring focuses are on small business employers and employees, and vulnerable and at-risk workers, including migrant workers.
- Compliance risk model leverages analytics and data across multiple agencies, industry and union intelligence, and feedback from inspectors are being used to tackle root causes of non-compliance and build sustainable compliance at the industry level.
- Joint field operations with Shadow Economy Taskforce partners, including the Australian Taxation Office (ATO), Australian Border Force (ABF), and state labour hire licensing bodies on Operation TOPAZ, are being used to ensure regional agriculture compliance.
Members welcomed FWO’s focus on partnership and recognition of compliant businesses, while noting the effectiveness of labour hire licensing enforcement and the increasing complexity of the workplace relations system.
Agency updates
ATO
Key achievements of the Shadow Economy Compliance Program from 1 July to 30 September 2025 were outlined, including:
- more than 120,000 compliance activities have been undertaken and raised over $842 million in liabilities
- the Tax Integrity Centre has assessed over 5,800 tip-offs, 68% of these involved shadow economy activities
- the Shadow Economy Taskforce has made 30 disclosures to member agencies in line with the Memorandum of Understanding and Regulations, which included 67 community tip-offs.
The updated shadow economy tax gap estimates have been published, outlining that:
- Shadow economy is estimated at around $25 billion in 2022–23, with growth primarily driven by small business income tax gaps, fringe benefits tax included for the first time and tobacco excise excluded.
- Key drivers include rising business cost pressures, increasing business complexity and diversity, and changing social attitudes to compliance.
- The ATO’s responses included
- the getting it right campaign, targeted media and education for small businesses
- visible enforcement through cross-agency field operations and mobile enforcement teams
- the continued focus on deliberate non-compliance rather than genuine mistakes.
Members raised concerns relating to accidental entrepreneurs who hold an Australian business number but do not see themselves as operating a business, such as side hustles and influencers. The opportunity to use data indicating business activity revealed through the Sharing Economy Reporting Regime was identified as an early ‘nudge’ event to encourage business set-up and raise tax awareness. The ATO outlined its longer-term direction including:
- providing simpler, pre-filled reporting experience for people with non-salary income
- using early data, including digital platform reporting, as a prompt to help people set up correctly
- leveraging networks to reach and support these taxpayers.
ABF
The ABF provided an update on migrant worker and post-border compliance activities, noting:
- Field operations remain focused on non-citizens who pose a risk to the community, such as migrant worker exploitation and human trafficking.
- Currently, 212 field visits have been undertaken this year, with around half of these visits focusing on education, emphasising checking work rights through Visa Entitlement Verification Online, understanding visa conditions and ensuring sponsored workers are performing roles that match their visas and claimed qualifications.
- There is increasing collaboration around the Pacific Australia Labour Mobility and related Pacific schemes, and working with other federal agencies, to better understand why some workers disengage from schemes and move into cash jobs.
- There are new powers under the Migration Amendment (Strengthening Employer Compliance) Act 2024, including prohibition notices that can prevent a business from employing non-citizens for a set period.
- ABF are shifting more effort towards education and prevention in light of budgetary constraints.
- ABF are deploying artificial intelligence (AI) and intellectual property analysis to identify unlawful immigration assistance scams.
Treasury
The Board of Taxation red tape reduction review is currently underway, with strong participation in recent consultations and alignment with ATO efforts to reduce tax compliance costs.
Work is progressing on updating Statements of Expectations for regulators following the Regulators Roundtable, with an emphasis on:
- regulators working together and sharing information where appropriate
- balancing compliance objectives with the need to avoid unnecessary burden, particularly for small businesses
- secrecy and information-sharing frameworks to support ‘tell us once’ approaches, including for victim-survivors of financial abuse so agencies can coordinate responses and treatment of debts.
Members suggested exploring broader regulatory information-sharing powers, such as those from Tax Practitioners Board and PwC-related reforms, to support economic regulation and reporting. Treasury noted this aligns with ‘tell us once’ policy directions and will be considered further.
Member updates
Industry members shared key observations, focusing on current economic pressures, regulatory change, and emerging risks impacting small businesses including:
- Many small businesses remain under significant pressure, particularly during peak trading periods. While confidence has lifted slightly from post-COVID-19 lows, many are focused on survival and durability rather than growth.
- Persistent skills shortages and declining apprenticeship completion rates are impacting sectors like construction, hairdressing and beauty. High proportions of solo operators in some industries can create churn, with employees leaving to work for themselves, and if unsuccessful, leaving the sector altogether.
- Construction insolvencies remain very high, with recent months recording record levels. Delivery of the National Housing Accord is at risk, with a significant shortfall against the first-year target and a need to construct more homes per year than has previously been achieved.
- Concerns about Payday Super implementation and the closure of the Small Business Superannuation Clearing House were raised, including the lack of a free alternative for micro businesses and the risk that additional costs could drive some businesses towards cash arrangements and the shadow economy.
- Strong potential to embed compliance into everyday software workflows, and e-invoicing, was seen as an important opportunity to improve security and streamline compliance-related data flows, if there is clear leadership and policy direction across government.
- There is growing concern about ATO debt on hold letters, including small and very old debts, with impacts on trust, disengagement risks, and the perception that advisers are being turned into informal debt collectors.
- There is suggestion of greater use of quality-based industry certification schemes, such as StaffSure, and closer scrutiny of procurement practices and contract terms that may drive non-compliance.
Other business
Rowan Fox has been appointed the Deputy Commissioner of Small Business and new co-chair for the forum.
Potential focus areas for 2026 were discussed, with topics suggested including:
- shadow economy tax gap
- sharing economy reporting regime
- e-invoicing and digital compliance infrastructure
- procurement and the shadow economy
- AI and early distress detection.
Members were invited to email ShadowEconomyAdvisoryForum@ato.gov.au more topic suggestions. A draft 2026 meeting schedule was discussed, with members suggesting at least one face-to-face meeting in Canberra, potentially hosted by the ATO.