The federal government is consulting on reforms to strengthen theModern Slavery Act 2018 (Cth) (the Act). Proposed reforms include penalties for non-compliance, a suite of enforcement powers, new and revised reporting criteria, changes to joint reporting, with targeted consultation in respect of mandatory due diligence and high risk matter declarations.
Following consultation, the government will progress legislative reforms. Reporting entities should consider whether they are prepared to comply with the proposed changes in anticipation of a stronger compliance and enforcement regime.
This consultation represents the first phase of the government's approach to strengthening the Act, and follows its response to the 2023 statutory review recommendations. The government is progressing consultations in two streams:
- a public consultation paper on options to strengthen the
transparency framework, with written submissions due by 1 September
2025; and
- targeted in-person consultations on more 'complex' policy issues, including declarations of high-risk matters and obligations for due diligence systems.
Background to the Modern Slavery Act reforms
Since 2019, the Act has required entities with an annual consolidated revenue of $100 million or more to prepare annual modern slavery statements which, amongst other things, describe the risks of modern slavery in their operations and supply chains, and the actions taken to address those risks. The statutory review of the Act found that, while there had been significant cultural change and broad support for the Act, it had not led to meaningful change for people living in conditions of modern slavery. The review made 30 recommendations. The government agreed (in full, part or principle) to 25 of these, and is currently consulting on reform options.
Proposed modern slavery reforms under consultation
The proposed reforms are significant and, if adopted, will have implications for reporting entities. Key reforms under consultation include:
- introducing penalties for specific non-compliance;
- strengthening the compliance and enforcement framework in the
Act;
- amending the mandatory reporting criteria;
- altering the group reporting framework;
- introducing a requirement for entities to notify the regulator
when ceasing to be a reporting entity;
- introducing a model for written declarations of high-risk
matters; and
- introducing a requirement for entities to have a due diligence system in place.
Penalties and enforcement powers
Most notably, the consultation paper recommends substantially expanding regulatory powers. Under the current framework, the Attorney-General may request remedial action or publish non-compliance notices. The proposed reforms would empower a regulator to compel disclosures, conduct audits, redact misleading information and issue civil penalties.
The government seeks feedback on a suite of compliance and enforcement options including penalties, infringement notices, enforceable undertakings and information gathering powers. Civil penalties are proposed for failing to submit a modern slavery statement, providing false or misleading information in a statement and failing to comply with a request for remedial action. Information gathering powers are proposed, for example, to determine whether there is evidence of false or misleading information in statements to issue a civil penalty, infringement notice or enforceable undertaking. The government also notes it will consider the role of a complaints procedure for the receipt and investigation of public complaints regarding reporting following the outcome of consultations on an enhanced compliance framework.
If enacted, these reforms would significantly elevate the risks attached to both non-compliance with reporting requirements and inadequate verification of the information reported. The good news is that a transition period is proposed before penalties take effect, giving reporting entities time to adapt to the new obligations.
Reporting criteria
The government also proposes amending the reporting criteria to elevate the quality, consistency, and utility of disclosures. It noted that a significant proportion of statements continue to be assessed as non-compliant.
Under the proposed changes, entities would be required to provide more detailed information about the actions taken to assess and address modern slavery risks, including risk identification and assessment methodologies. Delegated legislation may further outline specific actions that an entity must report on, such as internal governance processes, stakeholder engagement strategies, organisational policies and training for staff. Entities would also need to disclose information about their grievance mechanisms (such as whistleblower channels or worker hotlines) and outline information about the processes and actions to remediate modern slavery. Notably, the government has also flagged the potential for delegated legislation to include additional reporting requirements, such as the number and types of modern slavery matters remediated, and how effective the remediation processes have been.
The combined effect of these changes would be to align the reporting obligations more closely with international standards, such as those under the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. It would also mandate greater transparency, thereby elevating the legal and reputational risks for businesses perceived to not be meeting their public commitments.
Joint reporting
The government proposes to replace the current joint reporting framework, where any number of unrelated reporting entities can submit a joint statement, with a corporate group reporting model. Under the proposal, the highest entity (parent entity) within a consolidated corporate group would be responsible for submitting a single statement on behalf of all entities in the group, regardless of whether each individual entity meets the reporting threshold.
This approach is intended to streamline reporting by making it consistent with Australian Accounting Standards for corporate groups, clarify accountability, and support enforcement by clearly designating the responsible entity. Entities would be able to apply for exemptions to either report individually (as a subsidiary reporting entity) or have another entity report on their behalf (as a nominee reporting entity), offering flexibility for diverse business structures.
Notification requirement when ceasing to be a reporting entity
At present, there is no requirement for an entity to notify the regulator that it is no longer a reporting entity.
The government proposes to amend this by introducing a notification requirement. If an entity will not be providing a statement in a year following the earlier lodgement of a statement, it will be required to inform the regulator within six months of the end of the reporting period.
Matters for targeted consultation
The government will also conduct targeted consultation with relevant specialists on two additional measures which may subsequently be subject to broader consultation.
High-risk matters declaration
The first of these is a model for written declarations of high-risk matters. While the details remain to be seen, the statutory review recommended empowering the Commissioner or Attorney-General to designate jurisdictions, products or suppliers as high-risk and trigger enhanced reporting requirements.
Mandatory due diligence
The second is a requirement to have a due diligence system in place. Currently, entities are required to report on due diligence actions, but there is no direct requirement for entities to implement a due diligence system. This reform would make implementing a due diligence system a legal requirement. This is consistent with other jurisdictions that have or are considering mandatory human rights due diligence (for example, the European Union, United Kingdom, Canada and Norway).
Recommended actions to manage legal and reputational risk
These reforms signal a legislative shift towards greater accountability for modern slavery disclosures and actions taken to address risks. The Commissioner has confirmed that the Attorney-General's Department is progressing work in parallel to these proposed reforms to enhance its data matching capability to detect and identify entities that have failed to comply with the requirements to report under the Act. These developments increase the legal and reputational risks for non-compliance with the Act and inadequate verification of information reported within statements.
We recommend that reporting entities prioritise the following actions:
- Evaluate how the shift to a corporate group reporting
model could impact corporate groups' current approach
to reporting.
- Review compliance with the Act to identify any gaps and
areas of uplift for the next reporting period.
- Review and strengthen (as required) the entity's
modern slavery risk management program. This could
include uplifting policies, implementing due diligence systems, and
more actively engaging with suppliers to mitigate risk. Entities
should not wait until their next reporting deadline to implement
systems to assess or address modern slavery risk as they must
describe actions taken during the relevant reporting
period, not including actions taken in the six months between the
end of a reporting period and the due date for lodgement of the
statement.
- Evaluate whether current reporting and governance are 'fit for purpose' to mitigate risks of misleading disclosures.
Reporting entities with effective risk management programs and governance frameworks will be best positioned to comply with the likely reforms.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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