Focus on: Australia’s Litigation Outlook for 2026: Reform, Regulation and Litigation Trends

The past few years have left Australia’s legal and business environment unsettled. Geopolitical tensions, including regional conflicts and trade disputes, continue to inject volatility into global and domestic markets. Domestically, persistent cost-of-living pressures sit alongside a moderating labour market, creating an uneasy backdrop for monetary policy. After successive rate cuts in 2025, the prospect of a rate increase in early 2026 now sits uncomfortably back on the agenda. At the same time, the rapid expansion of artificial intelligence is forcing businesses, regulators and courts to confront whether recent developments represent incremental change or a more fundamental shift in how risk and responsibility are allocated.

Law and regulation have responded decisively over the past two years. Reforms across multiple practice areas have materially reshaped the Australian legal landscape. Regulators have reinforced those changes by clearly signalling their enforcement priorities for 2026, accompanied by a sharper and more interventionist approach to enforcement.

This article first revisits the key legal changes and the enforcement priorities foreshadowed by major regulators. It then considers the litigation trends most likely to emerge in 2026, to assist businesses and in-house counsel prepare for the year ahead.

I. Key Legal Changes Driving 2026 Litigation

Privacy, Cybersecurity and Data Law Reform

Privacy law underwent its most significant overhaul in decades with the first tranche of Privacy Act reforms taking effect in late 2024. Central to those reforms was the introduction of a three-tier civil penalty regime, replacing the previous single maximum penalty structure. Penalties for serious or repeated interferences with privacy were increased dramatically, with exposure for large corporates now extending to $50 million or more per contravention, depending on turnover.

The reforms also expanded the OAIC’s enforcement toolkit. Infringement notice powers were introduced for certain privacy contraventions, reducing reliance on court proceedings for enforcement and lowering the threshold for regulatory action. In parallel, a statutory tort for serious invasions of privacy commenced in June 2025, creating a direct cause of action for individuals independent of the regulatory regime.

Together, these reforms expanded both the penalty framework and the avenues for enforcement under Australian privacy law.

Artificial Intelligence and Court Procedure

In 2025, Australian courts issued formal guidance regulating the use of generative artificial intelligence by legal practitioners. The NSW Supreme Court released the first dedicated practice note on AI use, followed by similar guidance in Queensland and Western Australia. These directions make clear that lawyers remain fully responsible for the accuracy of all material filed with the court and impose disclosure obligations where AI tools are used in drafting or research.

Concurrently, courts have begun addressing disputes arising from AI-driven conduct. Multiple AI-related intellectual property infringement matters have been considered by the High Court.

Together, these developments mark the judicial engagement with AI in Australian litigation, both procedurally and substantively. That said, substantial risk remains in the over reliance on AI tools. In 2025, the Australian courts have on multiple occasions referred legal practitioners to professional regulators and imposed adverse costs consequences for AI-assisted submissions containing erroneous or misleading citations.

Competition Law Reform: Mandatory Merger Control

A major structural change occurred with the enactment of legislation establishing a mandatory merger control regime, commencing on 1 January 2026. The reform replaced Australia’s long-standing informal clearance system with a compulsory notification and approval framework for acquisitions meeting prescribed thresholds. Transactions completed without approval will be legally void.

The regime also expanded the scope of regulated transactions beyond share acquisitions to include asset acquisitions, expressly capturing transactions involving intellectual property.

Employment Law Reform

Employment law reforms enacted in 2025 introduced criminal wage theft offences, making intentional underpayment of employees a criminal matter rather than solely a civil contravention. The reforms also reinforced strict payment requirements under the Fair Work Act, including statutory obligations requiring employees to be paid in full for each pay period.

In addition, legislation introduced “payday superannuation”, requiring employers to pay superannuation contributions within seven days of each pay cycle from 1 July 2026, replacing the former quarterly payment model.

Financial and Regulatory Process Reforms

A series of reforms expanded the investigative and enforcement powers of financial regulators.

From January 2025, AUSTRAC was granted enhanced powers to compel individuals to attend examinations and answer questions as part of AML/CTF investigations.

In February 2025, Parliament enacted a Scams Prevention regime imposing mandatory detection and prevention obligations on banks, telecommunications providers and digital platforms, supported by civil penalties of up to $50 million.

In addition, a second phase of anti-money-laundering and counter-terrorism financing reforms is expected to expand the AML/CTF regime to cover additional high-risk services and professions, including lawyers, accountants, real estate professionals, trust and company service providers, and dealers in precious stones and metals. These entities will be brought within the AUSTRAC regulatory framework, with associated customer due diligence, reporting and compliance obligations.

Separately, amendments to the tax law expanded the ATO’s promoter penalty regime by extending limitation periods and significantly increasing maximum penalties, including penalties of up to $780 million for corporate promoters in serious cases.

These reforms materially strengthened regulators’ procedural ability to investigate and prosecute misconduct.

Digital Asset Regulation

Regulatory treatment of digital assets was clarified during 2025. ASIC updated Information Sheet 225 in late 2025, setting out when crypto-assets and related arrangements may constitute financial products, and when platform, custody or yield features trigger licensing, disclosure and conduct obligations under Australian financial services law.

In parallel, Treasury consulted on proposals to bring digital asset platforms and tokenised custody services within the existing financial services regulatory framework. These developments provided greater structural clarity around the regulatory perimeter for crypto-related activity in Australia.

Arbitration Reform

Dispute resolution frameworks also continued to evolve. ACICA commenced a review of its 2021 Arbitration Rules and Expedited Arbitration Rules, with revised rules expected to be released in 2026. While the final form of the reforms has not yet been published, public updates indicate a focus on procedural efficiency and modernisation, including expedited processes, emergency relief and more active case management.

These developments reflect a broader trend towards refining arbitration as a flexible mechanism for resolving complex and cross-border commercial disputes.

II. 2026 Enforcement Priorities of Key Regulators

ASIC

ASIC has reiterated its commitment to “strong, visible and active enforcement”, supported by a significant increase in investigations and proceedings commenced. For 2026, ASIC’s main focus is on misleading pricing and fee practices in financial services, financial reporting in the private credit market, and major fraud and corporate collapse investigations.

At the same time, ASIC continues to pursue insider trading and market manipulation, misconduct affecting financially vulnerable consumers, auditor misconduct, and superannuation trustee failures.

With this stepped-up enforcement posture, an increase in ASIC-initiated litigation is expected, and large financial institutions and their officers should be prepared for court action and substantial penalties.

ACCC

The ACCC has identified consumer protection amid ongoing economic pressure as a central priority for 2026. Its main focus areas include pricing and conduct in supermarkets and other essential services, energy and telecommunications pricing, competition and consumer issues in the aviation sector, conduct in the digital economy, misleading surcharges and add-on fees, environmental and sustainability claims including greenwashing, unfair contract cancellation terms, compliance with consumer guarantees, ACL compliance by NDIS providers, and child product safety standards.

At the same time, the ACCC continues to pursue cartel conduct and other anti-competitive behaviour, broader product safety issues, conduct that exploits consumer vulnerability or disadvantage, and conduct impacting First Nations Australians.

With this enforcement focus in place, businesses operating in cost-of-living-sensitive and consumer-facing sectors should expect heightened ACCC scrutiny and enforcement activity.

ATO

The ATO has outlined five priority focus areas for 2025–26:

First, the ATO is focusing on privately owned and wealthy groups as a distinct risk population, directing additional resources to complex group structures where governance, documentation and tax risk management have not kept pace with growth or structural complexity.

Secondly, core tax and compliance issues remain a priority, including registration, lodgement and payment failures, incomplete or inaccurate reporting, underreported income, and incorrect claims for deductions, concessions or incentives.

Thirdly, the ATO continues to scrutinise the use of business money for personal or related-party purposes, with particular attention on Division 7A non-compliance and mischaracterised intra-group transactions.

Fourthly, succession planning activity is under review, especially restructures, asset transfers and trust arrangements seeking access to CGT concessions, rollovers or exemptions without meeting eligibility requirements.

Fifthly, the ATO is applying targeted compliance programmes to specific industries and activities assessed as higher risk, including professional firms, property and construction, private equity, retail, cross-border transactions, crypto assets, retirement villages and GST refund arrangements.

With expanded data-matching and sector-specific programmes in place, privately owned groups and their advisers should expect increased ATO engagement, audits and enforcement action where tax governance, documentation and transaction characterisation cannot be robustly supported.

AUSTRAC

AUSTRAC’s regulatory priorities for 2025–26 centre on strengthening the effectiveness of AML and CTF risk management by reporting entities, as well as improving the quality of reporting to address money laundering, terrorism financing and proliferation financing.

From 1 July 2026, particular attention will shift to so-called Tranche 2 entities, including legal, accounting, real estate, jewellery and related service providers, as they come within the AML and CTF regime and begin embedding systems, controls and risk frameworks to meet new obligations.

Against this backdrop, AUSTRAC has emphasised the importance of early readiness and the implementation of robust risk management and reporting practices as the reformed AML and CTF framework takes effect.

OAIC

As noted earlier in relation to privacy law reform, 2026 is expected to mark a more forceful enforcement phase for the OAIC. The Commissioner has signalled an increased willingness to seek higher penalties for serious privacy breaches and to pursue civil proceedings alongside regulatory action, particularly in response to large-scale data incidents.

III. Disputes on the Rise: Litigation Trends in 2026

Taken together, the legal reforms and regulatory signals outlined above point to a disputes environment that is broader in scope and more enforcement driven.

Class Actions

Developments across privacy, consumer protection, employment compliance and ESG disclosure have expanded the range of issues capable of being pursued on a representative basis.

In addition, while decisions such as Blue Sky mean Victoria remains the only Australian jurisdiction in which contingency fees are currently available to plaintiff law firms, the federal government has signalled openness to extending contingency fee arrangements beyond Victoria through potential legislative reform.

Regulatory Enforcement Litigation

Consistent with the enforcement posture described above, regulators are increasingly prepared to tighten their enforcement approach, with more assertive and contested regulatory litigation likely to be pursued. Some regulators may make greater use of their dawn-raid powers to secure evidence.

Civil and Commercial Litigation

Tighter financial conditions and renewed interest rate pressure are placing increased strain on businesses across a range of sectors. In a more challenging operating environment, a greater number of companies are likely to experience liquidity stress or financial distress, increasing the incidence of formal insolvency appointments.

As a result, insolvency-related litigation is expected to become more prominent. This includes claims brought by liquidators and administrators, disputes concerning voidable transactions and insolvent trading, and challenges arising from creditor enforcement action. Commercial disputes between counterparties are also likely to increase as contractual performance is tested under harsher market conditions, particularly where projects are delayed, financing arrangements tighten, or counterparties seek to exit or renegotiate existing obligations.

Fraud and Misconduct Litigation
As financial conditions tighten and asset values decline, economic stress is likely to bring fraud and misconduct to the surface. Regulators have also identified fraud as an increasing risk in the current environment, and litigation is expected to follow, including claims in deceit, equitable actions to unwind tainted transactions, and statutory claims for misleading or deceptive conduct, frequently pursued alongside freezing order, insolvency and recovery proceedings.

Data, Privacy and Cybersecurity Disputes

As noted above, recent changes to privacy law and enforcement settings have sharpened the legal consequences of data incidents. Data breaches are now more likely to result in overlapping regulatory investigations, civil penalty proceedings and private claims. Where large groups are affected, privacy and cybersecurity disputes are expected to remain a significant source of litigation activity.

ESG and Climate-Related Litigation

Following the Federal Court’s order that Vanguard Investments Australia Ltd pay a $12.9 million civil penalty for misleading environmental, social and governance representations concerning its “ethically conscious” bond fund, greenwashing has emerged as a clear enforcement priority in Australia.

ASIC’s action against Vanguard, following earlier proceedings against Mercer Super and other regulatory interventions, signals a sustained willingness to pursue sustainability-related misleading conduct through civil penalty litigation under the ASIC Act and the Australian Consumer Law.

In parallel, private litigants, including consumer groups and shareholders, are testing avenues to pursue misleading or deceptive conduct claims in federal and state courts under the Australian Consumer Law and general law causes of action. Climate-related disclosure claims, including shareholder proceedings against Santos alleging misleading climate statements, illustrate how ESG disputes are increasingly extending beyond regulatory enforcement into private litigation.

Cross-Border Disputes

Finally, as outlined earlier, proposed revisions to the ACICA Arbitration Rules are expected to promote greater procedural efficiency and modernisation, reinforcing Australian arbitration as an increasingly attractive forum for the resolution of complex disputes.

In parallel, ongoing geopolitical tension between China and the United States is encouraging businesses to diversify operations and transactions beyond those jurisdictions. This dynamic is likely to increase Australia’s role as a venue for international commercial activity. In that context, Australian litigators can expect to encounter a greater volume of cross-border disputes, often involving multi-jurisdictional considerations and forum selection issues.

Final word

As 2026 approaches, Australia’s litigation landscape is being reshaped by a combination of legal reform, more assertive regulation and shifting economic and geopolitical conditions. While none of these forces is new in isolation, their convergence is creating a more complex and contested environment for disputes. For litigators, the challenge will not be limited to responding to individual cases, but to understanding how regulatory signals, market pressure and procedural change interact to drive litigation risk. Those best placed for the year ahead will anticipate where disputes are likely to emerge and implement risk reduction measures accordingly in an increasingly demanding disputes cycle.