Fuel cost recovery in road transport: What the Fair Work Commission order means for delivery pricing

In response to global conflict and fuel price volatility, the Fair Work Commission (Commission) issued the Road Transport Contractual Chain Order (Order), which sets urgent rules for fuel cost recovery in the road transport industry.

The mandatory Order commenced on 21 April 2026 and affects all businesses transporting goods within Australia. It will be in place until the price of diesel drops below $2 per litre.

What is the Road Transport Contractual Chain Order?

The Order is designed to make sure that increases in fuel costs are passed through the road transport supply chain, so that drivers and transport workers are not left absorbing higher fuel prices. It requires parties across road transport contractual chains to regularly adjust what they pay so fuel cost increases are recovered.

In some cases, existing transport pricing arrangements may satisfy the requirements set by the Order. For example, if a contract provides “rise and fall” rates.

The Commission will review the Order in late May 2026 and then every 3 months. Non-compliance with the Order can lead to civil penalties.

What does this mean for businesses in the road transport supply chain?

Any business sitting in a road transport contractual chain must adjust rates at least fortnightly or twice per calendar month. This is so the increased cost of diesel since 6 March 2026 is recovered by the people doing the transport work. Put simply:

When the price of diesel goes up, the cost of getting goods from A to B goes up too. The new rule says that everyone in the chain has to chip in more, so the truck driver is not left footing the bill.

If diesel stays expensive for a while, the extra payments happen every fortnight or twice a month, so costs keep up with the pump price.  When the average price of diesel drops below $2.00 per litre, the Order will switch “off”.

The Order puts direct obligations on “primary parties” at the top of a transport chain and on “secondary parties” further down the chain, and it overrides inconsistent contract terms while it is in force.

What has changed and who is in the scope?

The Order has been made under emergency amendments to the Fair Work Act in April 2026 in response to fuel price shocks linked to international conflict. It is now in effect across the road transport industry and extends to digital labour platforms operating in road transport, with cash‑in‑transit expressly excluded.

It applies to contractual chains where at least one party to the first contract is a constitutional corporation and where road transport work is performed for that party by a regulated contractor, an employee‑like worker or an employee, and it deems that work to be performed for every party to each contract in the chain.

Employees of primary or secondary parties themselves are not covered by the Order, and private individuals arranging purely domestic deliveries are excluded.

How to calculate fuel cost adjustments (and when the Order ends)

The adjustment must ensure recovery of the increased fuel cost measured against the situation on 6 March 2026, with “rate” defined by reference to the contracted or usual amounts paid as at that date. Businesses can meet the obligation in multiple ways, including rate increases.

The Order is time limited. Once the weekly average national terminal gate diesel price (as reported by the Australian Institute of Petroleum) is below $2.00 per litre, the fuel cost recovery rules stop applying.

What businesses should do now

1. Check if you are a “primary party” or “secondary party”
   
   You are a primary party if you are at the top of the road transport chain. For example, if you are a manufacturer, supplier, major retailer or construction company that first requires goods to be moved by road. This applies even if you did not directly hire the carrier. It covers road transport done by contractors, platform‑based workers, or employees where the transport benefits the first contracting party. As a primary party, you must:
   1. 1. update what you pay for road transport every two weeks or twice a month, so fuel cost increases are passed on; and
      2. take reasonable steps to make sure that parties further down the same transport chain pass fuel cost increases on to drivers and platform-based workers they engage, unless the primary party is a small business owner and is not a road transport business.

   You are a secondary party if you are engaged later in the transport chain, such as a transport company, fleet operator or subcontractor.
   
   As a secondary party, you must update what you pay to other secondary parties, regulated road transport contractors, and road transport employee-like workers, at least every fortnight or twice per month. This is so these parties recover fuel cost increases since the Order started (6 March 2026).

2. Identify where prices needed to be increased

   Fuel costs are measured against the position on or before 6 March 2026. Businesses should identify the usual rates being paid at that time, and identify all contracts and purchase order that include delivery, to know which rates may need adjusting.

3. Adjust your rates

   Businesses must adjust what they pay at least fortnightly (or twice per month) to ensure increased fuel costs are recovered. This can be done by:

   1. 1. increasing the rate;
      2. adjusting part of the rate;
      3. adding a transparent fuel levy;
      4. reimbursing or offsetting fuel costs; or
      5. using an existing cost-adjustment or rise and fall mechanism.

   Example: Calculating a fuel recovery adjustment

   Southern Shores Retail (SSR) designs homewares in Australia, which are manufactured in China, and then ships the finished stock to its Sydney warehouse. The new fuel cost recovery rules don’t touch the sea‑freight leg from China because they apply to road transport contractual chains, not international shipping. However, they do apply to the domestic road legs: warehouse‑to‑store deliveries and warehouse‑to‑customer last‑mile runs.

   Right now, the Australian Institute of Petroleum’s (AIP’s) latest report shows the weekly national average terminal gate price for diesel at about 284.6 cents per litre ($2.846/L) for the week ending 19 April 2026 (for illustration only; this figure changes weekly).

   Store replenishment run. SSR engages Kangaroo Logistics to deliver from its warehouse to five metro stores. Each store run is about 200 km in a rigid truck averaging roughly 2.5 km per litre, so one run uses about 80 litres (200 ÷ 2.5). Five runs a week is 400 litres; across a fortnight that’s 800 litres.  SSR’s 2025 contract assumed diesel at $2.50/L. Using the AIP wholesale price of $2.846/L, the difference is $0.346/L. Accordingly, SSR must add a fuel recovery of about $277 for the fortnight (800 L × $0.346) to Kangaroo Logistics’ invoice, and this must be updated every fortnight.

   Online orders, last‑mile. SSR uses QuickDrop Couriers for home deliveries. A typical van shift burns around 30 litres; SSR books 40 shifts a fortnight, using approximately 1,200 litres. Using the same difference ($0.346/L), SSR adds roughly $415 in fuel recovery per fortnight (1,200 L × $0.346) to QuickDrop’s payments. Because SSR is a “primary party”, it must also ask QuickDrop to pass enough through so its owner‑drivers recover their diesel costs, and SSR must document those “reasonable steps”.

   SSR will repeat the above recalculations at least every fortnight or twice a month, until the weekly national diesel indicator drops below $2.00/L, at which point the fuel pass‑through switches off.

   How Macpherson Kelley can help

   Every supply chain is different, and the new order will affect everyone differently, between farmers, processors, distributors and transport operators. It is crucial to stay on top of these adjustments.

   Navigating these changes requires careful planning and early engagement with the framework. If you would like tailored, practical advice on how the Order may affect your business, please contact Mark Metzeling or a member of the Macpherson Kelley Trade team.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.