New Fuel Cost Recovery Obligations in Road Transport Chains

The Fair Work Commission (FWC) has made its first Road Transport Contractual Chain Order (RTCCO), known as the Road Transport Contractual Chain Order – Fuel Cost Recovery – 2026. The order commenced on 21 April 2026 and introduces mandatory fuel cost recovery obligations across road transport contractual chains.

While the order is aimed at the road transport industry, its reach extends well beyond transport operators. Businesses in construction, manufacturing, retail, logistics and supply chain industries may also be affected if they engage transport services as part of their operations.

Why has the order been introduced?

The order was introduced in response to significant increases in fuel prices and concerns that rising fuel costs were being pushed down the supply chain onto transport operators, owner-drivers and small contractors.

The new regime is designed to ensure that increased fuel costs can be recovered throughout the contractual chain, rather than absorbed by those performing the transport work.

Importantly, the order is legally enforceable and non-compliance may expose businesses to disputes and civil penalties.

Who may be affected?

The order applies to parties involved in a “road transport contractual chain”. In simple terms, this refers to a series of contracts or arrangements where road transport work is performed somewhere within the supply chain.

This means the order may apply not only to transport companies, but also to businesses that engage or rely on transport services, including:

• construction companies;

• manufacturers;

• wholesalers and suppliers;

• retailers;

• logistics businesses; and

• principal contractors engaging subcontractors who perform transport work.

  
  

The Fair Work Ombudsman has specifically identified manufacturers, suppliers, large retailers and construction companies as examples of businesses that may have obligations under the order.

What does the order require?

The RTCCO imposes three key obligations.

1.       Rates must reflect increased fuel costs

Primary business parties to the first contract engaging another party to perform road transport work (or likely to involve road transport work) must ensure that the rates paid reflect increases in fuel costs since 6 March 2026.  Secondary parties to the RTCCO must pass on the increased amount paid to them by the primary parties to the next party down in the road transport chain in the contract.   The overall objective is that the person or party paying for the increased cost of fuel at the bowser is appropriately protected and compensated from the increase in fuel costs. 

Adjustments must occur regularly - at least every fortnight or twice per calendar month.

2.       Businesses must take “reasonable steps” down the chain

The order also requires businesses to take “reasonable steps” to ensure that parties they engage are similarly adjusting rates for fuel costs further down the supply chain.

This obligation is significant because it extends beyond direct contractual relationships. Businesses may need to consider whether subcontractors and downstream operators are able to recover increased fuel costs.

3.       Fuel cost recovery obligations continue throughout the chain

Parties further down the contractual chain must also pass back up through the contractual chain, any increased fuel costs to contractors and employee-like workers performing road transport work (such that these contractors or workers are not worse off because of increases in fuel prices post 6 March 2026).

In practice, the order is intended to ensure that fuel cost increases can flow up through the entire supply chain.

When does the order cease?

The RTCCO’s rules on fuel costs stop applying when the weekly average national terminal gate price for diesel fuel falls below $2 per litre.

The national terminal gate price for diesel is available at the following link: https://www.aip.com.au/

How can businesses comply?

The order does not prescribe a single compliance method. Instead, businesses can implement fuel cost recovery mechanisms in a range of ways, including:

• fuel levies or surcharges;

• rise-and-fall clauses;

• reimbursement arrangements; or

• direct rate adjustments.

  
  

Importantly, any adjustments do not need to be managed contractual and simply including a clause in a contract may not itself be enough. The arrangement must genuinely operate to reflect increased fuel costs and must do so frequently enough to comply with the order.

Existing contractual mechanisms may already satisfy the new requirements in some circumstances, particularly where contracts already contain fuel adjustment or rise-and-fall provisions. However, businesses with such provisions would need to consider potential increases twice per calendar month.

Key issues and uncertainties

One of the most challenging aspects of the order is the requirement to take “reasonable steps”.

The order does not clearly define what this means. However, businesses will likely need to:

• review their contractual arrangements;

• make inquiries about downstream arrangements;

• consider whether subcontractors can recover fuel increases;

• assess whether current pricing mechanisms are sufficient; and

• document how the business has considered diesel fuel pricing each fortnight.

  
  

This may create difficulties for businesses operating under fixed-price contracts or contracts with limited adjustment rights.

There is also uncertainty about how far businesses must go in investigating downstream compliance and what evidence will be required to demonstrate that “reasonable steps” have been taken.

What are the implications for failure to comply with the RTCCO?

There are a number of potential penalties for failing to comply with the RTCCO order, and these include:

• maximum penalties for standard contraventions of the Fair Work Act’s civil penalty framework are up to $99,000 per contravention for bodies corporate or $19,800 (individuals);

• Each failure to adjust rates within a fortnightly or twice-monthly period could potentially constitute a separate contravention, meaning penalties can compound;

• Back-payment of the fuel cost amounts that should have been passed through the chain;

• Injunctions requiring compliance going forward; or

• Accessorial liability - individuals such as directors and managers can be personally liable if they were knowingly involved in the contravention.

What should businesses do now?

Businesses should act promptly to assess whether they are part of a road transport contractual chain and whether their current arrangements comply with the new order.

Key steps may include:

• identifying where transport services form part of operations or supply chains;

• reviewing contracts for fuel adjustment mechanisms;

• assessing whether existing pricing models allow fuel cost recovery;

• considering whether contract amendments or variations are required;

• engaging with contractors and subcontractors regarding compliance arrangements; and

• documenting steps taken to assess and manage compliance obligations and develop new policies to manage compliance steps.

  
  

The FWC has indicated that the order will be reviewed regularly, including an initial review after one month of operation and then every three months – the next hearing is on 25 May 2026.

How GML can help?

At Gibson MacNeill Lawyers, we are advising clients across the transport, construction, logistics and supply chain sectors on the implications of the new RTCCO regime.

Our team can assist with:

• assessing whether your business forms part of a road transport contractual chain;

• reviewing existing contracts and pricing mechanisms;

• advising on compliance with the new fuel cost recovery obligations;

• assisting with contractual amendments and implementation strategies;

• drafting policies to manage compliance; and

• managing disputes or Fair Work Commission proceedings arising under the new regime.

  
  

If you would like advice about how these new orders may affect your business, please contact the team at Gibson MacNeill Lawyers.