In a significant development for Australia’s modern slavery framework, the Australian Government announced plans on 16 July 2026 to introduce a new criminal offence for the failure to prevent modern slavery and reiterated its intention to introduce civil penalties and associated enforcement powers to address non-compliance with the Modern Slavery Act 2018 (Cth) (Act).
If enacted, the offence will require businesses to move beyond annual modern slavery reporting and demonstrate that they have taken reasonable steps to prevent modern slavery in their domestic and global supply chains.
For Australian companies and foreign companies doing business in Australia, your modern slavery risk profile is now fourfold:
- Current reputational risks and foreshadowed civil penalties for non-compliance with existing reporting obligations.
- Proposed criminal penalties for failing to prevent modern slavery in your operations and supply chains.
- Rising consumer and anti-corruption law risks associated with the representations a company makes about the modern slavery risks in its operations and supply chains.
- Liability for slavery and human trafficking under Divisions 270 and 271 of the Criminal Code Act 1995.
A long road to criminal liability and civil penalties in the Modern Slavery Act
The proposed introduction of a criminal offence in the Act and civil penalties for non-compliance with reporting obligations have been years in the making.
Since its commencement in 2019, the Act has been criticised for relying on transparency rather than enforcement, often described as ‘toothless’, without substantive penalties for non-compliance (other than a mechanism for the Minister to publish details of reporting entities they consider are non-compliant on the modern slavery register).
Calls for reform have also been widespread:
- The 2023 McMillan Review into the first three years of the Act made 30 recommendations for reform to the Act, including penalties for various forms of non-compliance with the Act (Recommendation 20). The McMillan Review did stop short of recommending a duty to prevent modern slavery in the terms of the announced criminal offence.
- In December 2024, the Australian Government released its response to the McMillan Review, agreeing with the need to strengthen the compliance and enforcement framework in the Act and reiterating a previous commitment to holding consultations on reform. The Australian Government has since held extensive consultations with business and community stakeholders.
- Calls to strengthen the Act have been made at a domestic and international level, coming from the Australian Anti-Slavery Commissioner, advocacy groups (including the Committee on Economic, Social and Cultural Rights), human rights experts, the United Nations and most recently the United States.
Alongside reform pressures, risks associated with civil actions regarding modern slavery have also risen. In 2025, in a first of its kind, proceedings were commenced against an Australian retailer in the Federal Court of Australia for preliminary discovery, contending the company may have engaged in misleading and deceptive conduct if it was unable to prove that some of its products have not been sourced from forced labour camps in the Xinjiang region in China. The court’s decision is reserved.
How is the criminal offence likely to work?
While the details of the proposed offence and civil penalties remain to be seen, they will include:
- application to larger companies: in-scope companies include those with annual revenue over $100 million AUD (being companies already required to report under the Act)
- ‘reasonable steps’ requirement: the proposed offence will require in-scope companies to identify and prevent modern slavery in their operations and supply chains
- available defence: in-scope companies can avoid liability for the proposed offence if they can prove reasonable steps were taken to prevent modern slavery
- accompanying civil penalties: the reforms will also include civil penalties for non-compliance with reporting requirements under the Act, with details as to the range of those penalties to be disclosed.
Setting the tone for modern slavery obligations: improving Australia’s global standing on modern slavery
The Australian Anti-Slavery Commissioner has framed the proposed reforms, if implemented correctly, as an opportunity for Australia to be ‘a leader again’ in tackling modern slavery. If enacted, the proposed criminal offence would put Australia ahead of the United Kingdom, which has modern slavery legislation, but no penalties for non-reporting and no in-force mandatory human rights due diligence obligations. Similarly, while the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) includes penalties for non-compliance, the CSDDD is not yet required to be transposed by member states into national law and reporting deadlines are being slowly phased in.
The proposed criminal offence will also align with the ‘failure to prevent foreign bribery offence’ which was introduced in the Criminal Code Act 1995 (Cth) in September 2024, reinforcing a regulatory trend toward requiring companies to have effective systems in place to prevent serious misconduct. Much like the ‘reasonable steps’ defence to the new proposed modern slavery offence, a similar defence of showing the company had ‘adequate procedures to prevent the commission of foreign bribery’ was also introduced.
How should businesses respond?
We anticipate the Australian Government will publish further guidance regarding the proposed offence in time, but as to the immediate practical implications for businesses if the legislation is passed:
- Serious criminal consequences will follow if reasonable steps to prevent modern slavery are not taken, requiring businesses to take action on their approach to modern slavery now.
- Increased scrutiny of operations and domestic and global supply chains can be expected.
- Robust policies and frameworks are required, including comprehensive modern slavery risk management and reporting frameworks, stronger contractual protections and robust implementation of these protections, enhanced supplier due diligence and deeper supply chain audits.
This is especially so for companies with existing reporting obligations under the Act or those that have had to report under the Act in previous years.
Businesses will need to better understand their reporting obligations under the Act and how they can reduce exposure under the proposed reforms.
For more information on the modern slavery reform agenda, see our previous insights and learn more about Mallesons’ modern slavery team here.
