Australia Post has cancelled contracts with three large parcel delivery contractors following allegations first revealed by ABC's 7.30 of widespread underpayment of delivery drivers.

It also follows the arrest and charge with a range of offences of another large Melbourne-based Australia Post contractor, Bobby Singh.

Aus Lanka Express Pty Ltd, Harmony Xova Pty Ltd and KLMK Pty Ltd, all based in Victoria, were told in late September their contracts would end in 90 days.

An Australia Post spokesperson said: "Australia Post has terminated agreements with three Victorian-based principal delivery contractors, who breached contractual obligations and failed to meet compliance standards.

"This action should serve as a clear warning that if a contractor is not meeting the high standards expected of them by Australia Post, our customers and the community, we will act swiftly."

7.30 understands the contracts were terminated for compliance issues, not for alleged underpayment.

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The ABC first revealed allegations contractors were underpaying drivers and using foreign student labour in contravention of visa rules in July.

Aman and Bajinder, former drivers for Harmony Xova, told 7.30 they were paid well below the award rate, did not receive superannuation or sick and holiday pay, and were not paid for up to 14 hours every week they spent sorting parcels.

The two men, who asked to be referred to only by their first names, have lodged claims in the Federal Court for superannuation and additional wages they believe they are owed for approximately $11,000 and $35,000 respectively.

Chris Williams, who delivered parcels for Aus-Lanka Express in Parkes, told 7.30 he cleared no more than $15 per hour working full time for Aus-Lanka, which holds a large number of Australia Post contracts on the east coast.

KLMK is based in Melbourne and holds several delivery contracts in rural Victoria.

Approximately 70 per cent of parcels and 10 per cent of letters are delivered by contractors to Australia Post.

In August, Border Force raided a number of Australia Post delivery centres on the same day Singh was arrested by the AFP, accused of running an immigration racket.

Police seized $8.5 million worth of assets, including a 2014 Ferrari belonging to Singh.

It is alleged Singh and his associates were running fake colleges to source student visas for Indian students who then went to work as posties and parcel delivery drivers for Australia Post through Singh's labour hire companies.

In response to the news that Australia Post had cancelled the contracts of Harmony Xova, Aus Lanka and KLMK, Joan Doyle, the Victorian secretary of the CEPU said he was pleased.

"I'm pleased that Australia Post is taking action on individual principle contractors but they need to change their whole system."

Australia Post has commissioned the former Victorian police chief Ken Lay to conduct an independent review of Singh's operations.

The report is expected to be finished by the end of October, about the same time as an internal review of the company's contracting arrangements.