Former prime minister Kevin Rudd made the promise in 2007 that Labor would stop the trade of illegal timber products.
Today Forestry Minister Tony Burke delivered on that commitment.
Under the plan, companies will have to test the timber they source and provide a trade description.
Criminal offences and jail sentences will apply to those who breach the legislation.
Linda Selvey from Greenpeace says the illegal trade is responsible for the destruction of precious rainforests in the Asia Pacific region and this is a positive step.
“At the moment it’s very difficult to tell whether or not the timber that somebody purchases is logged legally or illegally but this proposed legislation puts the onus on the timber importers if the timber is illegally logged, so the due diligence puts the onus on them,” she said.
“What this means is Australian people will no longer be unknowingly purchasing timber that’s been stolen.”
Greenpeace says a forest area the size of a football field is being destroyed every two seconds.