Australia’s fuel costs orders require action by businesses

Looking further ahead, businesses should also keep a close eye on the Australian Council of Trade Unions' (ACTU) separate application to increase vehicle allowances across 27 modern awards, which could impose additional cost obligations from 1 July 2026.

In April, the FWC issued a road transport contractual chain order that imposes cost-of-fuel-related pay adjustment obligations for contracts or arrangements concerning the performance of work in the road transport industry. The order, which has been varied since, was sought by the Transport Workers’ Union of Australia (TWU) and Australian Road Transport Industrial Organization (ARTIO).

The order was made in response to the de facto closure of the Strait of Hormuz following the start of the Middle East conflict in late February, to account for the impact that has had on the availability – and price – of fuel. Between 20% and 30% of the world’s oil and liquefied natural gas supplies are thought to be impacted by the closure. The disruption had led to sharply increased prices for diesel and petrol in Australia, impacting businesses and workers across sectors – including those in a ‘road transport contractual chain’, such as retailers, logistics companies, passenger transport providers, waste management companies, fuel suppliers, construction contractors, and those engaged in transporting cash and other valuables.

Broadly, the order requires the ‘primary’ and ‘secondary’ parties in road transport contractual chains to undertake a fortnightly review of what they pay for the performance of works in scope of those contracts, to ensure that those performing works are not left out-of-pocket for an increase in the cost of fuel.

However, because of the way the order has been worded and the complex web of contracts to which it might concern, businesses face difficulties in interpreting how it applies to them and in implementing its requirements as a result.

Specifically, it is not entirely clear which parties in a road transport contractual chain are the ‘primary parties’, and as a result, which parties are the ‘secondary parties’. This is despite the FWC issuing a clarification on the point following its review of the order on 1 May.

The FWC enjoys various powers around road transport contractual chain orders, including being able to vary or revoke such orders or defer the operation or application of the order. It is next due to review the order on 25 May – businesses wishing to participate in the hearing must notify the FWC by 4:00 pm (AEST) on 21 May. 

Before then, businesses should:

• assess where they think they fit into the contractual chain;
• calculate the increased cost of fuel;
• engage with parties up – or down – the contractual chain, to remind them about their pay adjustment obligations, or ensure fulfilment of the obligations themselves;
• consider whether the FWC could give further clarification as to how the order is to be interpreted – and whether to file a formal notification to be heard on the matter at the 25 May hearing.

Businesses should also monitor for further FWC orders that could follow in response to the increase in cost of fuel. Most notably, the ACTU has fronted an application for a vehicle allowance increase in 27 modern awards – industrial instruments that set minimum terms and conditions of employment for certain occupations and sectors in Australia – that the FWC is currently considering.

The ACTU wants the FWC to intervene to ensure employees required to use their own private vehicles in the course of their employment obtain relief from the increased fuel costs they are incurring, arguing that “workers should not be worse off, out of pocket or subsidising their employers in the performance of their work in the context of surging oil and fuel prices”.

The adjustments sought by the ACTU, which would be effective from 1 July 2026, would increase the vehicle allowance amounts payable to employees covered by the relevant modern award, as well as employees who are covered by enterprise agreements which incorporate any of the relevant modern awards.