Bosses who don't pay workers' entitlements after businesses collapse will face harsher penalties

Matt Coughlan
(Australian Associated Press)

Bosses who don't pay workers' entitlements after businesses collapse will face harsher penalties under a proposed federal government crackdown.

Draft legislation released on Tuesday will penalise company directors and other people engaging in transactions directed at preventing, avoiding or reducing employer liability for employee entitlements.

The plan aims to reduce the burden on the taxpayer-funded Fair Entitlements Guarantee scheme, which pays workers as a last resort.

About $70 million from the scheme was used to pay the entitlements of sacked workers after the collapse of Clive Palmer's Queensland Nickel business.

Under the government's plan, there will be beefed up powers to sanction directors and company officers with a track record of insolvencies where the scheme is repeatedly relied on.

Entitlements could also be recovered from other entities in a corporate group.

Financial Services Minister Kelly O'Dwyer said misuse of the entitlements scheme created unfair commercial advantage over businesses doing the right thing.

"Corporate misuse of the Fair Entitlements Guarantee scheme hurts all hard-working Australians by placing an unfair burden on Australian taxpayers who ultimately bear the costs of those employers improperly relying on the scheme," Ms O'Dwyer said.