The Federal Government has announced its intention to reform the Modern Slavery Act 2018 (Cth) (the Act) across three key pillars: a criminal 'failure to prevent' offence, civil penalties for non-compliance with reporting obligations and guidance and education initiatives. Full details are available in the ministerial media release.

The announcement follows a statutory review led by Professor John McMillan AO (the McMillan Review), published in May 2023.The McMillan Review acknowledged the Act's positive impact in raising awareness but highlighted the need for stronger compliance and enforcement mechanisms. The Australian Government's response released in December 2024 (Government Response), endorsed 25 of the 30 recommendations (either fully, in part or in principle) and outlined a phased approach to reform, commencing with public and targeted consultation throughout 2025 and into 2026. 

This latest announcement comes amid growing international scrutiny of supply chain integrity. For example, the United States has recently imposed tariffs on countries that it stated do not enforce forced labour import prohibitions (including Australia). Recent reports about forced labour links in Australian consumer products have further highlighted perceived limitations with the current framework. The approach taken by the US relies on governments identifying forced labour suppliers and border enforcement. Australia's proposed 'failure to prevent' offence will, if legislated, place responsibility on businesses themselves. These developments reflect a shift away from transparency-based reporting frameworks and a move towards measures that may result in real consequences for inaction.

Alignment between the proposed reforms and previous policy positions

Two of the three pillars for reform are broadly consistent with the McMillan Review and the Government Response: 

• Civil penalties for non-compliance with existing reporting obligations. 
• Guidance and education to assist reporting entities in identifying, managing and remediating modern slavery risks.

However, the third pillar goes considerably further than recommendations previously contemplated. 

Where it differs – 'failure to prevent' offence

The Government intends to introduce a criminal offence for reporting entities with annual consolidated revenue over $100 million that fail to prevent modern slavery in their operations and supply chains, but has indicated that a 'reasonable steps' defence will be available.

While the acts constituting modern slavery are already crimes, the proposed offence is distinct. Recommendations 11 and 20 of the McMillan Review framed obligations in terms of maintaining due diligence systems and reporting on them. The Government's announcement goes further: it proposes a prevention-based obligation backed by criminal sanctions, requiring reporting entities not just to have systems, but to demonstrate they took reasonable steps towards achieving the prevention of modern slavery. 

This represents a fundamental shift. When the Act was introduced, the Government deliberately adopted a transparency and reporting framework. As noted in the McMillan Review, the Act, as currently in force, operates on a platform of voluntary compliance and administrative oversight. As was suggested in the Explanatory Memorandum to the then Modern Slavery Bill, the depth and opacity of global supply chains make it difficult for businesses to understand where goods originate, particularly beyond tier-one suppliers. The Government took what it described as a cautious and incentive-based approach, with the three-year review mechanism included to allow the regime to mature over time. The proposed reforms signal that the Government now considers the regime sufficiently mature for that next step. 

Proportionality and the challenges of supply chain visibility

A critical question for reporting entities will be how deep into their supply chains they should look and at what point due diligence obligations are reasonably exhausted. Global supply chains can extend across dozens of tiers and hundreds of jurisdictions. Complete visibility is, in practical terms, unachievable – a reality the Government itself acknowledged when first introducing the Act.  The proposed inclusion of a 'reasonable steps' defence suggests the focus will remain on whether a reporting entity has implemented adequate systems and controls - not whether modern slavery occurred despite those efforts. It will be important for the amending Act and associated guidance to provide clarity on this issue.  Otherwise, businesses will be incentivised to simply avoid any area of risk rather than work with their broader supply chains to improve practices.

What this means for reporting entities

The Government has indicated that it will continue to work closely with stakeholders through consultation intended to inform the design of the proposed legislative changes. Until further details are available, reporting entities should: 

• Monitor developments closely – the breadth of open design questions means the consultation period will be critical in shaping the final framework.
• Assess current due diligence settings – particularly whether the entity's existing systems, controls and documentation would support a 'reasonable steps' defence. 
• Identify potential gaps – in governance, modern slavery due diligence, supply chain risk assessment, supplier engagement and monitoring processes.
• Engage in upcoming consultation – to help shape the regime. 

Reporting entities should not wait for legislation to be introduced before assessing whether their current modern slavery risk management and due diligence processes would withstand increased regulatory scrutiny. Our team is closely monitoring developments and can help organisations assess potential impacts and prepare for change.