On 16 July 2026, the Federal Government announced its intention to make significant reforms to Australia's modern slavery legislation. The centrepiece reform is the introduction of a new criminal offence where companies (with an annual consolidated revenue over AUD 100 million) "fail to prevent" modern slavery in their supply chains.

A defence to the offence will be available if a company can demonstrate that it took "reasonable steps" to prevent modern slavery.

The Government also intends to introduce civil penalties and related enforcement powers to address non-compliances with existing obligations under the Modern Slavery Act 2018 (Cth) ("Act").

The proposed reforms represent a significant shift towards greater corporate accountability for modern slavery issues.

• The announcement signals a policy shift away from simply requiring reporting entities to report on modern slavery risks, to the imposition of legal consequences where they fail to take adequate action.
• Reporting entities should expect increased scrutiny of their supply chain due diligence practices.
• Reporting entities should consider how and whether they could demonstrate that they have taken "reasonable steps" to identify, prevent and address modern slavery risks within their supply chains.
• Boards and senior management should ensure that modern slavery risk assessments and management frameworks are fit for purpose and supported by appropriate oversight, governance and record-keeping processes.
    

What is the current position?

At present, the Act requires any Australian entity (or an overseas entity carrying on business in Australia) with an annual consolidated revenue of at least AUD 100 million (referred to as a "reporting entity") to publish an annual statement setting out (among other things) the risk of modern slavery practices in its operations and supply chains, together with the actions taken by it to assess and address those risks. Critically, the Act does not impose any civil or criminal consequences for entities that fail to satisfy those reporting requirements.

What is the proposed "failure to prevent" offence?

The Government has proposed the introduction of a new criminal offence targeting reporting entities that "fail to prevent" modern slavery occurring within their supply chains.

A defence will be available to a reporting entity that can show it took "reasonable steps" to prevent modern slavery from occurring. The intent is to shield companies that have put in place genuine due diligence and risk mitigation measures, while holding to account those that have failed to take meaningful action.

Alongside the new offence, the Government has indicated that civil penalties and corresponding enforcement powers will be introduced for breaches of the existing reporting obligations under the Act.

Why has the announcement been made now?

The timing of the announcement is notable. The US Trade Representative has for some time been investigating a number of countries, including Australia, over their handling of goods made with forced labour. On 3 July 2026 the US Government threatened new tariffs of up to 12.5% on Australian imports because of our Government's alleged inaction on forced labour. The proposed reforms to the Act covered in this alert followed very shortly thereafter.

What other reforms are being considered?

The Government for some time has been considering other reforms to the Act including:

• Introduction of civil penalties for providing false or misleading information in a modern slavery statement
• Introduction of new regulatory powers to deal with non-compliances (for example, information gathering powers, powers to issue enforceable undertakings and/or infringement notices and the power to apply for a civil penalty order)
• Changes to the mandatory reporting criteria (for example, to clarify that a reporting entity is required to report on grievance mechanisms)
• Introduction of a mandatory, risk based, modern slavery due diligence obligation for reporting entities
• Introduction of a mechanism for the Anti-Slavery Commissioner to declare that a particular product, service or industry carries a high risk of modern slavery, and a requirement that entities have regard to such declarations as part of their due diligence and reporting obligations
• Changes to joint reporting which would mean that a reporting entity's parent entity would be responsible for submitting a statement on behalf of a corporate group, where the annual consolidated revenue of the group meets the reporting threshold.

These reforms are currently under consideration and have not been expressly mentioned in the Government's most recent announcement covered above.

What should companies do now?

The precise details of the new offence, civil penalties and enforcement powers are not yet available (and the Government will consult on all this). We are particularly interested in what a reporting entity will be required to do to demonstrate that it has taken "reasonable steps" to prevent modern slavery in its supply chains.

However, this is a good time for reporting entities to review their modern slavery frameworks/systems, assess supply chain risk-management practices and identify any gaps before the reforms are implemented. We will update you as soon as we hear more.