Australia proposes failure-to-prevent modern slavery offence: What reporting entities should do now

The Australian Government has announced plans to strengthen the Modern Slavery Act 2018 (Cth) (Act) by introducing a criminal failure-to-prevent offence and civil penalties for non-compliance with existing reporting obligations.

Although the details remain subject to consultation and draft legislation, the proposed reforms signal a potentially significant shift: from a regime focused principally on annual disclosure towards one that may also test whether companies have taken reasonable and demonstrable steps to prevent modern slavery in their supply chains.

What has the government announced?

On 16 July 2026, the government announced that it intends to introduce:

• a criminal offence applying where a company with annual consolidated revenue over A$100 million fails to prevent modern slavery in its supply chains;

• a defence where the company can demonstrate that it took reasonable steps to prevent modern slavery; and

• civil penalties and associated enforcement powers for non-compliance with existing obligations under the Act.

Further consultation is expected to consider the design and enforcement of the proposed offence, including a possible deferred prosecution agreement scheme and remedies for victims and survivors.

The precise elements of the offence, the meaning of “reasonable steps”, applicable penalties and commencement arrangements have not yet been released.

Why is the proposed offence significant?

The existing Commonwealth regime requires reporting entities to prepare annual statements describing their modern-slavery risks and the actions taken to assess and address those risks.

The proposed offence could materially increase the importance of the systems and controls that sit behind those statements. For affected companies, compliance may no longer be assessed only by reference to what is disclosed annually. It may also depend on whether the company can establish, through contemporaneous evidence, that reasonable preventive steps were designed, implemented and monitored.

In practical terms, a modern-slavery statement that is disconnected from the entity’s operational risk-management framework is unlikely to provide sufficient preparation for the proposed regime.

What should reporting entities do now?

It would be premature to assume what the final legislation will require. However, reporting entities can take several no-regrets steps that support compliance with the current Act and improve readiness for the proposed reforms.

1. Review governance and accountability

   Entities should confirm that responsibility for modern-slavery risk is clearly allocated across the board, executive management, legal, procurement, risk and sustainability functions.

   Escalation pathways should address suspected incidents, supplier non-cooperation, control failures and remediation decisions.

2. Test the risk-assessment methodology

   Risk assessments should be robust and identify exposure by sector, geography, product or commodity, workforce model and supply chain tiers. Entities should ensure that their methodology captures risks within their operations as well as its supply chains.

3. Assess whether supplier controls operate in practice

   Policies and contractual clauses alone may not demonstrate effective prevention. Entities should examine supplier onboarding, due diligence systems and processes, audit and information rights, worker-engagement mechanisms, corrective-action plans and consequences for repeated non-compliance.

4. Review incident-response and remediation processes

   Entities should have a clear process for investigating indicators of modern slavery and processes for remediation. The process should consider the interests and safety of affected workers and avoid responses that may inadvertently increase harm.

5. Strengthen the supporting evidence

   Companies should retain auditable evidence of risk decisions, due-diligence activities, supplier engagement, training, escalation, remediation and monitoring. This evidence may become important in demonstrating the reasonable steps taken by the company.

Updated reporting guidance

Reporting entities should also consider the Attorney-General’s Department’s March 2026 supplementary guidance when preparing their next modern-slavery statement.

The guidance provides examples addressing the identification of modern-slavery risks, actions taken, assessment of effectiveness, consultation with owned or controlled entities, governing-body approval and responsible member signatures.

In particular, the guidance indicates that generic commitments or descriptions of future activity may not adequately address the mandatory reporting criteria. Statements should explain granularity with regard to modern slavery risks, the actions taken during the relevant reporting period and how the effectiveness of those actions has been assessed including statistics and evidence to support the effectiveness of actions.

What happens next?

The Government will undertake further consultation before the proposed offence and enforcement framework are finalised. Reporting entities should monitor the consultation and any exposure draft carefully, particularly for detail about:

• the scope and elements of the offence;

• the meaning of reasonable steps;

• the application of the offence to corporate groups and overseas supply chains;

• the proposed penalty and enforcement framework; and

• commencement and transitional arrangements.

The proposed reforms have not yet become law. However, entities with mature, evidence-based modern-slavery risk frameworks will be better placed to respond once the final requirements are known.

Cowell Clarke’s ESG team assists reporting entities with modern-slavery reporting, governance and compliance readiness. We can review an entity’s current framework and identify practical improvements across risk assessment, supplier due diligence, remediation, effectiveness measures and supporting evidence.