Tax advisors who help their clients avoid Australian laws could be subject to hundreds of millions of dollars in penalties as part of the biggest crackdown on misconduct in the nation's history.
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Strengthening regulator powers and integrity in the tax system will also be part of a Commonwealth push to restore public confidence.
A scandal involving confidential federal tax briefings being leaked by a former PwC partner Peter Collins cast a shadow over private consultancy work for governments at all levels.
Police are investigating allegations Mr Collins illegally shared tax policy information that he had access to under a federal government contract.
The Albanese government will introduce sweeping reforms to crack down on multinational tax avoidance.
Maximum penalties will be increased from $7.8 million to more than $780 million for advisers and firms who promote tax exploitation schemes.
The larger penalties are aimed at reducing incentives for firms to use confidential government information to help their clients.
Labor senator Deborah O'Neill said the changes were a signal to big consultancy firms that old ways of doing business belonged to the past.
"Sadly, it seems that in the audit and assurance world, providers of this dodgy tax information have decided that a small fine or negotiation might just be the cost of doing business," she told reporters in Canberra.
"Those days are done."
The changes will also expand penalty laws and make it easier for Australia's tax regulator to apply them to advisers and firms who promote tax avoidance.
Australia's tax regulator will have an increased time frame of six years after the conduct occurred to bring on Federal Court proceedings, up from the current four-year limit.
Proposed reforms will also seek to remove limitations in existing tax secrecy laws which were a barrier to regulators acting in response to the PwC breach.
The Australian Taxation Office and Tax Practitioners Board will be able to refer ethical misconduct for disciplinary action.
Whistleblowers who provide evidence of misconduct will have more protections and the board will also be given up to 24 months to complete complex investigations.
Senator O'Neill said the government's announcement marked a significant moment in tax system integrity for Australia.
"Some people have operated out of a model in the past where they thought they were not only beyond the scrutiny of regulators but that they were above the law of the land," she said.
"It's time now (for companies) to work with the government, with national and international audit bodies and standards to lift their sights beyond pure profit-making and personal gain and undertake their professional responsibilities ethically and properly in the national interest."
While treasury is co-ordinating the government's response to systemic issues raised by the PwC scandal, the attorney-general's department will also review the use of legal professional privilege, which can obstruct investigations.
The finance department will review confidentiality arrangements across all government agencies to ensure they are fit for purpose, legally binding and enforceable.
This review will also identify ways to strengthen how conflicts of interest are managed.
The NSW government is considering law changes that could result in million-dollar penalties for private consultants who leak confidential tax information or cover up breaches by their colleagues.
The Tax Institute said recent allegations had put a cloud over the profession and welcomed reforms to increase the sector's integrity.
"We are all - government, regulators, professional associations and practitioners - custodians of the tax system," general manager Scott Treatt said.
"This is a positive step toward joint accountability and consistent but fair due process.
"That kind of transparency is crucial in maintaining trust and fairness in our tax system."
Australian Associated Press
