* Govt says A$54,000 maximum fine is too low
* Employee watchdog says underpayment is "rampant"
* Govt also increases funding and powers of employment ombudsman (Adds quotes from former competition regulator)
By Byron Kaye
SYDNEY, May 19 (Reuters) - Australia unveiled plans on Thursday for a ten-fold hike in fines for employers who underpay staff after 7-Eleven convenience store franchisees were accused of ripping off migrant workers, in what some experts believe is a widespread practice.
The government also said it would boost funding for the Fair Work Ombudsman by A$20 million ($14.4 million), bolster the regulator's evidence-gathering powers and set up a taskforce to help migrant workers.
The hike in proposed penalties is a measure of the outrage sparked by a 2015 Australian Broadcasting Corp report which accused Australia's 7-Eleven Stores Pty Ltd of letting franchisees threaten workers with deportation if they complained of being paid as little as half the minimum wage. also suggests an attempt by the conservative government of Prime Minister Malcolm Turnbull to appeal to voters concerned by his Liberal Party's tough stance on asylum seekers ahead of July 2 elections. A day earlier, Immigration Minister Peter Dutton sparked criticism by warning that "illiterate and innumerate" refugees would steal Australian jobs. for underpaying workers are currently A$10,800 for an individual and A$54,000 for a company, amounts "seen as an acceptable cost of doing business", a policy document released by the government said.
7-Eleven was not immediately available for comment.
Allan Fels, the former competition regulator, was the preferred choice to lead the new migrant worker taskforce, the policy document said.
Fels was hired by 7-Eleven to run an independent inquiry into underpayment but earlier this month said he had been fired after resisting what he called a threat to his independence.
"Underpayment is rampant, and the government measures are a significant step in addressing it," Fels told Reuters by telephone.
Fels said most of the 20,000 7-Eleven franchise employees over the past decade were underpaid by about 50 percent. He added that before being fired, he recovered an average of A$40,000 per person for 400 7-Eleven employees, from 2,000 who came forward with complaints.
He estimated that the number of cases where workers of other Australian franchises have been underpaid in similar circumstances was "at least in the tens of thousands".
The Australian 7-Eleven franchisor is owned by Japan's Seven & i Holdings Co 3382.T and licensed by U.S.-based 7-Eleven Inc SILC.UL , which is facing accusations of unfair treatment of its franchisees in North America. ($1 = 1.3862 Australian dollars)