Internet users who are caught repeatedly illegally downloading copyright material from the internet could have their accounts suspended for six months or be forced to pay $15,000 in reparations.
The Government today released its proposed replacement for the replacement for the controversial section 92A of the Copyright Act 1994.
The original law, aimed at combating internet piracy such as file-sharing, sparked a huge outcry as opponents pointed out it could force the closure of websites following any accusation of breach of copyright, even if it was not proven, forcing the Governmetn to have a rethink.
Under the Government's new recommendations, copyright holders will be able to request that internet service providers (ISPs) warn copyright violators to stop.
If the offending continued after three notices, the right holder could seek a penalty of up to $15,000 at the Copyright Tribunal and if it continued, right holders could seek the suspension of accounts for up to six months.
Mr Power said the three-notice procedure was aimed at both educating and warning file-sharers that unauthorised sharing was illegal, in a bid to cut it down.
Though right holders would be able to seek suspension of accounts through the courts, Mr Power said he expected it would happen only in cases of serious offending.
"I want to stress that account holders will have the opportunity during each of these processes to defend claims by right holders," he said.
Account holders will be able to issue counter notices, and can request a hearing if they feel they should not be penalised, he said.
In March, the Government announced it would scrap the controversial Section 92A of the Copyright Amendment (New Technologies) Act and start from scratch.
It conceded the law's original format was confusing and rendered it unworkable but said it was still committed to combating internet-based copyright violations.
The original law instructed internet service providers that they "must adopt and reasonably implement a policy that provides for termination" of the internet accounts of anyone deemed a repeat offender - regardless of whether the person has been convicted of a crime or not.
Internet service providers were required to act as gatekeepers, blocking internet access to anyone accused of breaking copyright laws including illegally downloading films and music.
The original law sparked protests at Parliament as well as the BlackOut campaign, where people opposed to the law were encouraged to replace their avatars on all internet sites with a black box to illustrate what the internet could look like following the law change.
"This was a complex issue to work through, and industry groups, intellectual property experts, and officials worked hard to ensure the issues raised in the submissions were addressed.
"I'm confident we now have a workable solution," Mr Power said.
The public will be able to make further submissions at the select committee stage.
Mr Power said he expected the legislation to become law next year.