A report by the small business ombudsman has found a now-defunct tribunal which set minimum charge-out and pay rates for truck owner-drivers caused them financial hardship.

The report by Kate Carnell, released by the employment minister, Michaelia Cash, on Thursday found the majority of submissions from owner-drivers reported they would lose work if they had to increase their rates.

But the Transport Workers’ Union has hit back at the report, arguing it ignored systemic cost-cutting, bankruptcies and hardship that existed in the trucking industry before the imposition of the tribunal’s first pay order in April.

The Road Safety Remuneration Tribunal (RSRT) set minimum rates that truck owner-drivers had to charge to ensure they weren’t lowly paid and incentivised to skip breaks or neglect maintenance.

The government, with crossbench support in the Senate, abolished the RSRT in April over concerns it would put the owner-drivers out of work because they could not compete with drivers employed by larger trucking companies who were not subject to the order.

Carnell’s report found the order - which was only in effect for two weeks and was never enforced - made owner-drivers uncompetitive “exacerbating the competitive pressures already faced by owner-drivers”.

The inquiry received two submissions that in at least two instances people reported an owner-driver they knew had taken their own lives “as a consequence of financial pressure, at least in part” due to the payments order.

The ombudsman noted some observations from reports to government in 2014 and 2016 that questioned the link between pay and safety, but neglected to mention the 2016 PwC report found a “statistically significant” correlation between the two.

Carnell’s report concluded “safety in the transport industry should not be addressed by legislating rates of pay”. Tribunals are “not appropriate for developing complex industry-wide regulation that intervenes in market forces”, it said.

In comments to Guardian Australia the Transport Workers’ Union national secretary, Tony Sheldon, said that arbitration through the RSRT allowed negotiation and setting of safe pay rates before the government “overrode judicial independence” and abolished it.

He said the report was “despicable” because it attempted to link the “horrendous problems in our industry such as suicide” to the pay order in place for just two weeks.

“The newsflash for Kate Carnell is that these suicides, bankruptcies and hardships have been going on for years and a safe rates system will tackle them by forcing wealthy clients to stop paying unsustainable rates and setting unrealistic deadlines,” he said.

The union pointed to submissions to the inquiry from owner-drivers like Steven Melichar, who said in the 10 days the pay order was in effect his income had increased from $1,600 to $2,960 because he was paid for time to load and unload.

“Prior to the [order] and now again since the RSRT’s abolishment, I on average work six hours a day that is not paid for because my trucks wheels aren’t turning,” he submitted. Melichar reported feeling “more relaxed and refreshed” during the period of the order.

But Carnell’s report found such cases were the minority because 34.3% of respondents to an anonymous survey with just 138 respondents reported they suffered financial loss due to the pay order. Just 3.7% said the order was good for their business.

TWU assistant national secretary, Michael Kaine, said the increased pay rates were graduated and could have been phased in with a later start date but “the RSRT didn’t have time to work its way through” implementation issues due to its sudden abolition.

Sheldon and Kaine said it would be unlawful to sack an owner-driver because they had to charge the new increased rates.

At a press conference in Canberra on Thursday Cash said the union and Labor had used safety as a pretext to regulate pay when the former government introduced the RSRT. The pay order was “discriminatory” because it only applied to owner-drivers, she said.

The employment minister said the report included “evidence from the owner-drivers themselves that the work was drying up, there would literally be nothing left for them on the day the order came into force”.

“This report now confirms in black and white that is exactly what occurred - lives were devastated.”

Asked how the report could claim hardship was due to the order rather than conditions in the industry, including low pay before the order, Cash said that owner-drivers reported they were “already being told by the contractors they would not have jobs”. She said this did not constitute mere anecdotal evidence.

Cash said the 2016 PwC report did not find a “conclusive” link between pay and safety, and its consideration of peer-reviewed literature which demonstrated the link was “merely commentary in the reports”.