Australia’s evolving AI governance landscape: Regulatory changes set to impact employers

The furious pace of the adoption of AI at scale has represented a significant regulatory challenge to society, due to the swift expansion of both the capabilities of AI and its uses. Unsurprisingly, our current legal frameworks, which were never designed with such technologies in mind, have been outpaced by this rapid transformation, which has prompted significant regulatory scrutiny and debate about reform.

In this article we address three key regulatory changes regarding the use of AI and the related practical considerations for employers.

National AI Plan (NAP)

The Commonwealth recently published the first National AI Plan in December 2025. The NAP underscores the future approach to regulation in the area, which will focus on retrofitting AI regulation into existing legislative architecture. Despite the Commonwealths’ initial intention to immediately introduce mandatory guardrails for AI use, the NAP emphasises that the recently established AI Safety Institute will continue assessing appropriate mandatory guardrails before implementation.

The NAP focuses on tasking existing regulators with addressing AI related risks within their own regulatory domains. This approach is purported to allow the flexibility necessary to address the inevitability of further changes to AI capabilities in the future. Further, it prioritises utilising the existing expertise of regulators to ensure that the unique impact that AI may have in different areas is appropriately conceptualised and regulated.

The public desire for an approach that focuses on maintaining existing legal frameworks, rather than a wholesale, transformative approach to regulating AI, was recently made clear through public debates held over a potential text and data mining exception in Australian copyright law.

Employers should expect that employees may be concerned about the impact that AI adoption will have on their tasks and, as a result, their job security.  As a consequence, protections against AI implementation have become a key focus area for unions for future enterprise bargaining agreements.

Workplace surveillance regulation

The advanced surveillance capacity that AI tools offer can give employers a cost-effective and unobtrusive way for more nuanced tracking of employee performance, but in doing so, has the capacity to make use of otherwise very personal information. In early 2025, the Victorian Legislative Assembly’s Inquiry into Workplace Surveillance found that workplace surveillance capabilities have become increasingly sophisticated in recent years. Notably, the inquiry heard examples of surveillance that used AI, biometrics and neurotechnology to ‘excessively’ and opaquely evaluate concentration and attention levels.

After the conclusion of the inquiry in November 2025, the Victorian Government supported 15 recommendations from the inquiry. The proposed reforms include imposing reasonability and proportionality requirements on workplace surveillance systems and mandating that 14 days written notice is given to employees before any surveillance systems can be implemented.

Similarly, the NSW Parliament this month passed the NSW Work Health and Safety Amendment (Digital Work Systems) Bill 2026 (NSW). This bill will impose a positive duty on employers to keep worker protections ‘front of mind’ in the development and use of surveillance systems in managing work, and allow union representatives holding proper entry permits to inquire into and inspect relevant AI systems.

As surveillance capabilities continue to become more sophisticated, it is important for employers to ensure that their systems remain compliant with evolving state regulations as they are introduced, and that the business benefits of such developing capabilities are balanced with the potential adverse effects on employee wellbeing and goodwill.

Properly striking this balance is particularly important given the introduction of the new statutory tort for serious invasions of privacy through the introduction of the Privacy and Other Legislation Amendment Bill 2024 (Cth) (the Privacy Amendment Bill) that commenced on 10 June 2025. The effect of the amendments is to significantly limit an employer’s ability to rely on the employee records exemption under the Privacy Act 1988 (Cth) (the Privacy Act), when the actions constitute a serious invasion of privacy. Employers therefore need to ensure that any surveillance systems implemented will not be characterised as misusing employee information by inadvertently intruding into an employee’s private activities or affairs, without consent or lawful authority.

Automated decision making (ADM) protections

Whilst traditional use cases of ADM have been largely limited to administrative processes, ADM processes are being increasingly adopted for use in the private sector and employment decisions. This adoption of AI is only likely to increase the extent of its use. Whilst ADM can deliver value for employers through improving efficiency and consistency during hiring, evaluation or termination processes, the opaqueness of automated decision-making poses a significant risk.

In response to the infamous Robodebt saga, the Privacy Amendment Bill introduced an obligation that entities’ privacy policies disclose how they use computer programs (including AI) to make decisions that ‘significantly affect’ individuals’ rights or interests by using ‘personal information’. The amendment comes into effect on 10 December 2026 and is squarely aimed at addressing the opacity of AI decision-making, and the need for reasons to be articulated to support decision-making.

Employers must therefore ensure that if using ADM after December 2026, their privacy policy clearly details the personal information used, which decisions are made ‘predominantly’ or ‘solely’ by ADM, and that their implementation of ADM emphasises transparency, review rights and human oversight.

Key takeaways for employers

• The future regulation of AI is likely to focus on evolving the scope of existing privacy and regulatory regimes
• Ensuring compliance with new provisions is incredibly important to protect employers from exposure to financial losses, penalties and reputational damage
• The impact on employee morale and the health and safety issues that may arise from the use of AI are important considerations to keep in mind when considering the manner and extent of AI implementation
• Be aware that AI and issues arising from its use are likely to be the subject of enterprise bargaining.

Ongoing developments in AI capabilities and changing regulatory schemes will ensure that the regulation of AI in the workplace remains a dynamic and evolving area. With policies still developing, employers should watch this space for insight as to what future reforms may be on the horizon.

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Authored by:

Andrew Rich, Partner
Edwina Kaupa, Senior Associate
Aidan Gall, Seasonal Clerk