On 21 August 2026, the Attorney-General’s Department released a Consultation Paper on a proposed new criminal offence for large entities that ‘fail to prevent’ modern slavery within their supply chains.
This consultation forms part of the second-phase of the Australian Government’s approach to strengthening the Modern Slavery Act 2018 (Cth) (Modern Slavery Act or Act), following the 2022 statutory review of the Act, the government’s response to that review released in December 2024 and its first-phase of consultation in 2025.
The federal government recently reaffirmed its ongoing commitment to ‘combatting modern slavery’ and ‘equipping companies to better identify and address risks in their global supply chains’.
Key takeaways
- A new ‘failure to prevent’ criminal offence is proposed for corporations with annual consolidated revenue over $100 million.
- Absolute liability is the preferred model, with strict liability and recklessness also under consideration.
- Corporations may be able to rely on a ‘reasonable steps’ defence, supported by ministerial guidance.
- Submissions on the Consultation Paper are due by midnight (AEST) on Friday 25 September 2026.
A quick refresh on the government’s strengthening of the Modern Slavery Act
As outlined in a previous insight, the 2022 review of the Act found that the current reporting framework alone was insufficient to drive meaningful change and made 30 recommendations for strengthening the Act, including through the introduction of penalties for non-compliance, a requirement for mandatory due diligence and enhanced oversight. The Australian Government accepted the majority of the review’s recommendations.
The first-phase of consultation, conducted in 2025, focused on proposed amendments to the reporting framework and the introduction of mandatory due diligence requirements, including potential penalties for non-compliance with reporting obligations.
The focus of the current consultation
This second-phase consultation, opened on 21 August 2026, focuses specifically on the proposed ‘failure to prevent’ criminal offence, alternative enforcement mechanisms (including deferred prosecution agreements) and the adequacy of civil remedies.
The proposed ‘failure to prevent’ offence that is the subject of this consultation will:
- apply to corporations with an annual consolidated revenue over $100 million
- require organisations to demonstrate that ‘reasonable steps’ were taken to identify, prevent and address modern slavery risks within their operations and supply chains
- operate alongside existing offences under Divisions 270 and 271 of the Criminal Code Act 1995 (Cth) (Criminal Code) and the reporting regime established under the Modern Slavery Act.
Failure to prevent models are intended to promote a preventative approach to risk management, incentivising companies to strengthen compliance systems and governance frameworks, while providing an additional enforcement option.
If enacted, this will significantly shift Australia’s modern slavery regime, with a greater focus on corporate accountability and enforceable compliance.
What companies need to know about the proposed ‘failure to prevent’ offence
- No requirement to prove knowledge: the proposed offence would apply absolute liability, meaning there would be no requirement to prove that the corporation knew or should have known about the underlying modern slavery within its supply chain. Strict liability and recklessness are presented as alternative fault elements for consultation.
- Individual liability: the offence is targeted at corporations and would not directly apply to individuals, directors or other office holders. However, individuals may be subject to criminal liability under existing Criminal Code provisions in certain circumstances, such as where they aid, abet, counsel or procure the offending conduct.
- Supply chain and corporate conduct nexus: the offence would require both a connection between the criminal conduct and the corporation's sourced goods, services or inputs, and a link between the corporation's own conduct (including omissions) and the underlying offending (e.g., where corporate activities caused, contributed to, facilitated or enabled the exploitation). Stakeholders are invited to comment on the appropriate threshold for establishing these connections.
- Reasonable steps defence: a defence would apply where a corporation can demonstrate on the balance of probabilities that it had taken reasonable steps to prevent modern slavery. Ministerial guidance will be issued to assist corporations, drawing on existing international standards on business and human rights. Compliance with the guidance may be considered by the courts when determining whether ‘reasonable steps’ were taken.
- Significant penalties: there are three proposed options for the maximum penalty: 100,000 penalty units (currently approx. AUD 36 million); three times the value of the benefit obtained from the offending conduct; or 10% of the corporation's annual turnover.
A delayed commencement period of 12-18 months is proposed to provide corporations with sufficient time to implement necessary changes to supply chain management practices.
Other key issues for consultation
The government is also consulting on the introduction of a deferred prosecution agreement (DPA) scheme as an alternative enforcement mechanism. A DPA would allow corporations to agree to measures such as strengthening governance and compliance, remediating harm, compensating victims and cooperating with investigations, in exchange for the deferral or discontinuation of criminal proceedings. Such a scheme has not previously been adopted in Australia.
In addition, stakeholders have been invited to consider whether existing civil remedies (including reparation orders, Fair Work Act rights, common law remedies and victim compensation schemes) provide adequate avenues for redress, or whether additional civil remedies should be introduced.
Next steps
Responses to the Consultation Paper will inform the design of the proposed legislative changes. Reporting entities should consider engaging with the consultation process and reviewing their modern slavery risk management frameworks against the proposed reasonable steps defence.
Submissions are open until midnight (AEST) on Friday 25 September 2026.
These developments will continue to be closely monitored. If you would like to discuss any aspect of the proposed reforms, please get in touch with our team.