The changes, which include penalties of up to $1.1 million for individuals and $5.5 million for corporations, were passed in the NSW parliament on Thursday after a scandal over confidential federal tax briefings being leaked by a former PwC partner.
The tough multi-million-dollar penalties will apply to individuals, corporations or other organisations caught using or disclosing confidential government taxation information.
The state government said it routinely consulted with external representative industry bodies on tax policy and legislation on a confidential basis.
An upper-house inquiry last month was told drastic action was needed to curb problems with consulting firms that walk both sides of the street by working for the government and private clients in the same area.
Finance Minister Courtney Houssos said the laws would ensure integrity remained at the heart of the NSW government's tax system.
"The new multi-million-dollar penalties send the strongest signal yet that divulging confidential government information won't be tolerated," she said in a statement on Thursday.
The amendments to the system of fines in NSW also enhance Revenue NSW's ability to recover tax debts from "phoenix" operators who liquidate companies and transfer assets to others to avoid paying their debts.
The bill includes a 12-month pause on payroll tax audits for GPs and their practices to allow for ongoing consultation with the sector, including the Royal Australian College of General Practitioners and the Australian Medical Association.
A 12-month pause on tax penalties and interest accrued on outstanding payroll tax debts incurred before and at the commencement of the 12-month period will also apply.
The pause comes amid increased cost pressures on GPs following the former Federal Liberal government's decision to freeze the indexation of bulk-billing rebates for many years, the government said.
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