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Labor has unveiled its proposed design for the news bargaining incentive (NBI), the plan to make large digital platforms pay for news content in Australia.

Replacing the Morrison government’s news media bargaining code (NMBC), the incentive is the latest move to force companies to make commercial deals with publishers and help fund journalism.

Here is how it will work:

What is the government's new levy on tech companies?

Platforms including Google, Meta and TikTok will be required to make commercial deals with Australian media outlets, or they will be forced to pay a dedicated 2.25% levy on local revenues.

Outlets have long complained the platforms make huge revenues from news content they don’t pay to produce.

Treasury says the money raised will go towards ensuring “the sustainability of Australian news and journalism”. The government will not keep any revenue.

If platforms and media outlets agree on new deals, offsets of between 150% and 170% would be applied to their liabilities under the NBI, saving them from paying the new levy.

The federal government would collect the revenue and pass it on to media outlets, with the amount determined by how many full-time journalists the outlet employs. Outlets based in rural and regional areas, small operators and those that represent multicultural or marginalised communities would receive more money though “weighting” rules.

Why is Albanese charging tech companies now?

The NBI model replaces the NMBC, which Labor says is no longer effective. Two years ago, Meta, the parent company of Facebook and Instagram, said it would not renew deals worth about $70m to compensate for news content being shared on their platforms.

Meta’s withdrawal badly undermined the scheme, and the government is under pressure from media outlets to use the power of the law to force new deals.

Labor first proposed the new model in late 2024. The prime minister, Anthony Albanese, said on Tuesday strong journalism was “critical to a healthy democracy”.

Consultation about the discussion paper is open until 18 May. The government plans to introduce the new laws to parliament in the winter sittings in May and June.

Which social platforms will have to pay for Australian journalism?

Platforms will undergo a “two limb” test for participation. As well as having minimum revenues of $250m, social platforms would be covered if they have more than 5m users in Australia. Search businesses with 10m or more users will be included.

News businesses will be required to be registered with the Australian Communications and Media Authority, under a test of criteria covering six points: revenue, content, professional standards, editorial independence, Australian audiences and connection to a relevant news product.

LinkedIn and Apple are expected to be outside the scheme, because they employ editorial teams internally.

What has the reaction been?

A joint statement from the bosses of the country’s biggest media companies – including Nine, the ABC, News Corp and Guardian Australia – urged parliament to pass the plan, to protect “Australian journalism and the vital role it plays in our democracy, for all Australians”. The companies said digital platforms paying for “reliable, professionally created news and information” was in the public interest.

The Greens want a “big tech tax” introduced to stop platforms “ripping off the content of journalists and creators”. They say they will study the government’s proposal.

The shadow communications minister, Sarah Henderson, did not indicate a position on Tuesday, but criticised Labor for letting the Coalition-era model collapse.

Google said it rejected the need for “this new tax”, claiming it ignored existing deals, misunderstood how the advertising market works and unfairly exempted players including Microsoft, Snapchat and OpenAI.

A Meta spokesperson said news outlets benefited from posting on its platforms. “A government-mandated transfer of wealth from one industry to another, with no connection to the value exchanged, will not deliver a sustainable or innovative news sector,” they siad. “Instead, it will create a news industry dependent on a government-administered subsidy scheme.”

Former competition tsar Allan Fells, now chair of the Public Interest Journalism Initiative, welcomed progress on the NBI. “If this reform is to succeed, it must remove any ambiguity. The platforms need to understand that participation is not optional, and that failure to engage will carry consequences.”

What about Trump?

The US president, Donald Trump, has threatened retaliation against countries treating US platforms unfairly. Labor’s plans have been delayed due to fears about Trump’s reaction.

Albanese was asked if he had discussed the plan with Trump before it was announced. “We’re a sovereign nation and my government will make decisions based upon the Australian national interest,” he said. “We do that right across the board.”

Criticism from Trump would likely play into the politics at home and in the broader shift underway in the US-Australia alliance.