Australia passed legislation on Thursday (August 20) that will force tech giants to pay millions of dollars in levies if they fail to strike commercial deals with local media outlets for news carried on their platforms.

The News Bargaining Incentive taxes companies at 2.5% of their advertising revenue unless they strike agreements with local news publishers.

Proceeds from the scheme will be directed to Australian news outlets, whose content helps drive user engagement and advertising revenue on the tech firms’ platforms.

The levy applies to Meta, Alphabet’s Google, TikTok and Microsoft’s LinkedIn, covering companies with a “significant” social media or search service in Australia and local advertising revenue exceeding A$250 million ($178 million).

Platforms can avoid the charge by reaching agreements with at least eight different publishers by the end of their reporting period. The value of those deals will be offset against their levy liability.

The deals must support the production of news content or relate to news content produced by the publishers and made available online by the platform, according to the legislation.

Spending with large publishers carries a 150% offset, while spending with small and medium-sized outlets carries a 200% offset.

Any single deal is also capped at 25% of a platform’s levy liability.

“The legislation is here, and the message to platforms to pursue commercial deals is clear. Deals will need to be finalised before the end of a digital platform’s financial reporting period to be used to offset their liability in that period,” the government said in a statement.

“This is an important day for Australian news businesses and Australian journalism.”

The passage of the News Bargaining Incentive comes a day after Parliament passed laws restricting gambling advertisements.