Coal long service leave: New obligations for mining sector contractors

The passage of the Coal Mining Industry (Long Service Leave) Legislation Amendment Bill 2025 on 2 July 2026 marks a significant development for contractors operating in and around Australia's black coal mining sector. The legislation follows recent Federal Court decisions that have clarified the scope of the Coal Mining Industry Long Service Leave Scheme (Coal LSL Scheme) and addresses a long-standing area of uncertainty regarding coverage of employees engaged by contractors and service providers. While the Bill passed Parliament on 2 July 2026, the relief provisions will commence on the first day of the second calendar month following Royal Assent. Assuming Royal Assent occurs in July 2026, the relief framework is expected to commence on 1 September 2026. 

While the reforms provide a pathway for employers to manage historical unpaid levy obligations, they also highlight a potentially material balance sheet and cashflow risk for construction, maintenance, engineering and labour hire organisations that have historically not participated in the Scheme. The implications extend beyond payroll compliance and may affect contract profitability, mergers and acquisitions activity, workforce planning and corporate governance.

For affected businesses, early assessment and action will be critical. 

Understanding the Coal LSL Scheme 

The Coal LSL Scheme is Australia's portable long service leave arrangement for eligible employees working in the black coal mining industry. Unlike traditional long service leave schemes, employee entitlements are based on service within the industry rather than continuous employment with a single employer. The scheme is funded through employer levy contributions currently set at 2.7 per cent of eligible wages.

Historically, uncertainty existed regarding whether certain contractors and service providers operating on mine sites fell within the scope of the Scheme. This uncertainty was particularly relevant for: 

• Construction contractors
• Engineering service providers
• Maintenance contractors
• Equipment servicing businesses
• Labour hire providers
• Shutdown and project delivery contractors.

Recent Federal Court decisions, have provided greater clarity regarding coverage and have resulted in some organisations identifying substantial historical levy liabilities.

Why this matters for businesses supporting coal mining operations 

Many construction and engineering businesses have traditionally viewed themselves as supporting the mining industry rather than operating within it. The recent legal clarification challenges that assumption. 

Where employees perform activities that are sufficiently connected to coal mining operations, businesses may now find that historical wages should have been subject to coal long service leave levies. The result could be the emergence of significant legacy liabilities spanning multiple years.

What relief does the new legislation offer? 

Importantly, the legislation is not solely designed to improve collection of unpaid levies. It also establishes a voluntary framework to encourage employers to disclose and resolve historical liabilities.

Under the new arrangements, eligible employers may be able to: 

• Enter into a structured multi-year repayment arrangement that allows historical levy liabilities to be paid progressively 
• Obtain a waiver of additional levies that would otherwise function as penalty interest 
• Receive a remission of 20 per cent of the historical liability after 80 per cent of the covered debt has been paid 
• Avoid recovery action while complying with an approved repayment arrangement.

The reforms are intended to balance two competing objectives: 

1. Protecting employee entitlements; and 
2. Avoiding financial distress among employers that were affected by historical uncertainty.

Employers may also be able to reduce historical levy liabilities where they have previously made long service leave payments directly to employees under applicable State legislation, the National Employment Standards or enterprise agreements. 

Actions businesses servicing coal mining operations should take now 

The legislation creates an opportunity for a limited time to access relief provisions. Businesses that delay action may face fewer options in the future and increased scrutiny from regulators. Importantly, access to the relief measures is not indefinite. Employers must notify Coal LSL of their intention to enter into an Unpaid Levy Payment Arrangement (ULPA) within a prescribed period following commencement of the legislation. Businesses that delay assessing their position may lose access to some of the available concessions. 

Organisations operating within the coal mining value chain should not assume they are unaffected, and should take action by: 

• Conducting a coverage assessment
  Review workforce activities to determine whether employees may fall within the scope of the Scheme. Particular attention should be given to long-term maintenance, operational support and site-based project delivery activities 
• Quantifying historical exposure
  Undertake a detailed payroll review to estimate potential historical levy obligations and assess available employee records. The legislation specifically contemplates situations where historical records may be incomplete 
• Modelling future costs
  Forecast the impact of ongoing 2.7 per cent levy contributions on project profitability, labour budgets and contract pricing
• Reviewing existing contracts
  Assess whether current arrangements permit recovery of additional labour-related costs and consider updating pricing methodologies for future tenders 
• Evaluating participation in relief arrangements
  Businesses with potential liabilities should evaluate whether participation in the voluntary repayment framework could materially reduce their financial exposure through waived penalties and debt remission.

BDO comment 

While the newly enacted relief measures provide a valuable opportunity for affected employers to regularise historical obligations, the window to access those concessions is limited. Businesses should act promptly to assess their position, quantify exposure and determine an appropriate compliance strategy.

For construction, engineering, maintenance and labour hire businesses servicing coal mining operations, the reforms represent more than a workplace relations issue. They create a potentially material compliance, financial and governance risk that may affect profitability, cash flow, tender pricing, transactions and corporate reporting. With relief measures only available for a limited period, organisations should act promptly to assess coverage, quantify exposure and determine whether participation in the voluntary repayment framework is appropriate. 

How BDO can help 

BDO has experience assisting employers with Coal LSL Scheme audits and compliance reviews required under the Coal Mining Industry (Long Service Leave) legislation. We understand the practical challenges involved in identifying eligible employees, assessing qualifying service, reviewing historical payroll records and meeting reporting and audit requirements under the scheme. 

We can assist businesses to conduct Coal LSL audits to identify potentially eligible employees, qualifying service and levy exposures, and assist in meeting the legislative audit and verification requirements associated with submissions to Coal LSL, including the auditor's report required for an Unpaid Levy Payment Arrangement (ULPA). 

With relief measures only available for a limited period, an early Coal LSL audit can help businesses understand their potential exposure, evaluate available concessions and develop an appropriate compliance strategy.

BDO’s audit and assurance team has experience working alongside management, finance and human resource management teams to deliver a practical and commercially focused approach to managing Coal LSL obligations. Contact us for support today. 
 

Disclaimer: BDO is not a law firm and does not provide legal advice. Where legal interpretation or advice is required, including in relation to the application of legislation, employee coverage or contractual rights and obligations, we can work alongside appropriately qualified legal advisers to support clients in developing and implementing a practical compliance strategy.