Fuel cost recovery: Key changes for road transport contracts

On 20 April 2026, the Fair Work Commission made the Road Transport Contractual Chain Order – Fuel Cost Recovery – 2026 (the ‘Order’), effective 21 April 2026, under Part 3B-2 of the Fair Work Act 2009 (Cth).

The Order responds to fuel supply disruptions arising from reduced shipping through the Strait of Hormuz, and requires parties in road transport contractual chains to adjust rates to recover increased fuel costs. Businesses that engage haulage, freight and logistics services should review their contractual arrangements and project budgets immediately.

Who does it apply to?

The Order covers primary parties, secondary parties, road transport businesses, digital labour platform operators, road transport employee-like workers, and regulated road transport contractors within road transport contractual chains.

A primary party is broadly a business that directly engages a road transport business or another primary party to perform road transport work (e.g. a business contracting with a freight or haulage operator).

A secondary party is one that directly engages regulated road transport contractors or road transport employee-like workers – typically owner-drivers – to perform road transport work. “Fuel” is broadly defined to include any liquid or gaseous energy source used to power transport vehicles, not merely diesel.

Key obligations

Primary parties must, within each fortnight or twice per calendar month, adjust the rate paid to other primary parties by the amount necessary to recover the increased cost of fuel, measured against fuel prices on or before 6 March 2026. Primary parties must also take reasonable steps to ensure that secondary parties adjust rates paid to regulated road transport contractors and employee-like workers accordingly. Small business employers that are not road transport businesses are exempt from this chain obligation but remain subject to primary-to-primary rate adjustment requirements.

Secondary parties must make equivalent fortnightly rate adjustments to other secondary parties, regulated road transport contractors, and road transport employee-like workers. Adjustments may be made by rate adjustment, fuel levy, direct reimbursement, or any combination. Compliance may also be satisfied by existing “rise and fall” formulae or cost benchmarking models in contracts, collective agreements, or applicable State/Territory instruments, applied on a reasonable-averaging basis. Adjustments made before the Order’s commencement may be credited.

Disputes relating to the Order may be referred to the Fair Work Commission.

Contravention of the Order is a civil remedy provision under section 536NP of the Fair Work Act 2009 (Cth). The Fair Work Ombudsman has standing to bring civil penalty proceedings and has signalled a focus on compliance in this area.

Cessation

The Order’s obligations cease if the weekly average national terminal gate price for diesel (Australian Institute of Petroleum) falls below $2.00 per litre. The Fair Work Commission will review the Order after the first month and quarterly thereafter.

Key actions

The Order will be felt across the property and construction sector, given the industry’s heavy reliance on road transport for the movement of materials, plant, and waste.

There are several practical steps that affected businesses should consider:

1. Audit transport arrangements: Identify road transport contractual chains in which your business participates and determine your status as a primary or secondary party.
2. Review project budgets: Update cost plans and tender pricing to reflect potential fuel adjustment claims from 21 April 2026.
3. Assess existing mechanisms: Determine whether any current “rise and fall” or cost benchmarking provisions already satisfy the Order’s requirements. If not, amendments may need to be negotiated to achieve compliance.
4. Update contracts: Ensure new transport contracts include express fuel cost recovery provisions and back-to-back protections.
5. Monitor diesel prices: Track the Australian Institute of Petroleum’s weekly diesel price report to identify when the Order’s obligations may cease.
6. Seek legal advice: Particularly where chain structures are complex or financial exposure is material.

Businesses that are not a party in a road transport contractual chain for the purposes of the Order should also take note if they contract with businesses that are subject to the Order. For example, a principal under a head construction contract may not be a party in a road transport contractual chain, but it may still be exposed to claims from the head contractor seeking to recover its additional costs due to fuel cost increases, either through existing contractual mechanisms, or by seeking ‘ex gratia’ relief. We therefore recommend that existing contracts are reviewed to identify any potential exposure to claims.

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Authored by: 

Daniel Middleton, Partner