The ground floor of the Construction Forestry Mining and Energy Union headquarters in Lidcombe was badly damaged after a car was driven through the front then set alight about 10.30pm, police said.

"The alarm went off at about 10.20pm and the sprinkler system was activated by a fire," CFMEU state secretary Andrew Ferguson said.

"We've been told a car was stolen from Wiley Park, driven through the perimeter fencing of the union complex, then the car, which was filled with drums of petrol, was driven through the glass front door of the building.

"Petrol was then splashed all around the foyer of the building, a match was lit, and according to police we are very lucky that the car didn't explode."

A church and community group were using the building until an hour before the attack, Mr Ferguson said.

"If they had been in the building and the car had exploded with petrol in it there could have been a loss of life," he said.

The union is in the midst of a "very sharp dispute" with a contractor who's alleged to have underpaid a group of workers, Mr Ferguson said.

"It's possible that the contractor might be responsible ... police are investigating and hopefully the issue is given priority," he said.

A NSW Fire Brigades spokesman said there was no sign of the driver when fire fighters arrived.

Firefighters managed to extinguish the blaze but upper levels of the building suffered smoke damage, police said.

Anyone with information about the incident should call Auburn police via Crime Stoppers on 1800 333 000.