A Figtree parent claims a Premier Illawarra school bus driver "yelled" at his daughter and other students because too many of them were standing in the aisle.
Some young students started crying at the alleged outburst.
However, Transport for NSW stated the bus company reviewed the audio and video footage and found there was no issue.
Peter Birkle's daughter is in Year 11 at the Illawarra Christian School (ICS) and catches a Premier Illawarra bus to and from their Figtree home.
Mr Birkle contacted the Mercury regarding complaints of overcrowding on this school bus run and said her daughter told him it caused an extreme reaction from one driver.
"Last week one morning she texted me on the bus and said 'the bus driver's just pulled over next to Figtree High School and started yelling at all the kids'," Mr Birkle said.
"She said he said kids must sit in the seats and my daughter told me there was already three to a seat.
I don't know whose fault it is but it's certainly a safety issue.Parent Peter Birkle voicing concerns about students having to stand in the aisle on crowded school buses.
"This Kindy child who also goes to ICS had to sit on my daughter's lap, because the bus driver was so infuriated.
"If my daughter has to comfort a little Kindy kid like that, then that's not normal."
Premier Illawarra was contacted but declined to make any comment on the issue.
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However, Transport for NSW - who issues the contract to Premier Illawarra to run bus routes in the city - said the company had already investigated the incident.
"CCTV footage, which includes audio, indicates that the driver pulled to the side of the road and calmly directed students to seats," a Transport for NSW spokesman said.
"Some children were asked to remove their bags from the seats to allow other children to sit down."
Mr Birkle also expressed concern at the number of students standing in the aisle of the bus and said a Premier Illawarra official told him there were restrictions on the number of children who could stand.
"I don't know whose fault it is but it's certainly a safety issue," Mr Birkle said.
"Either Premier aren't taking it seriously or the government needs to provide extra buses.
"There's just not enough room on the bus to sit all the students and it's freaking the drivers out."
Transport for NSW said different buses were used on this route from one day to the next.
The capacity of each bus differs based on its make and model.
The bus at the centre of the alleged incident is limited to carrying 13 standing customers.
Also, in terms of seating capacity on school buses, the Passenger Transport Regulation 2017 states three children are permitted to occupy a single seat on a school bus if each child is less than 12 years of age.
"The safety of our customers and staff is our number priority so whenever a Transport for NSW contracted service reaches capacity, operators are directed to make other arrangements to collect other customers," the Transport for NSW spokesman said.
The spokesman said these other arrangements available to companies could include providing a spare bus to complete the service.