Online platforms spreading misinformation could face millions of dollars in penalties under new proposed government legislation that bolsters the power of Australia's media watchdog.

The Australian Communications and Media Authority (ACMA) would be armed with the ability to require digital platforms to keep certain records about matters regarding misinformation and disinformation and turn them over when requested.

Communications Minister Michelle Rowland said this would "essentially mean that the regulator is able to look under the hood of what the platforms are doing and what measures they are taking to ensure compliance".

The ACMA would also be able to request the industry to develop a "code of practice" covering measures to combat misinformation.

Violating the code could result in penalties up to $2.75 million dollars or 2 per cent of global turnover — whichever is greater.

And lastly, the ACMA would be empowered to create and enforce its own industry standard.

Penalties for breaching the standards could see companies paying up to $6.8 million or 5 per cent of their global turnover.

Freedom of speech concerns

Shadow Minister for Communications David Coleman raised some concerns about the new proposed law, noting "this is a complex area of policy and government overreach must be avoided".

"[The] public will want to know exactly who decides whether a particular piece of content is misinformation or disinformation," he said.