Horrific footage of dead and dying sheep on ships bound for the Middle East has prompted sweeping reforms to Australia's live export trade, but Canberra stopped short of an outright ban on Thursday.
Video images taken last year showed heat-stricken sheep crammed together in small, stifling pens and covered in excrement, shocking the Australian public when it was released by animal activists in April.
Agriculture Minister David Littleproud on Thursday labelled the footage "disgraceful" but resisted calls to outlaw live exports entirely after a government review.
"There will be no ban to the live sheep trade in the Middle Eastern summer," he told reporters.
"However, as a result of this review, we will be making serious and meaningful change to the industry."
Exporters will now be required to increase cargo space for sheep by up to 39%, varying according to seasonal temperature.
Independent observers will also have to travel on all ships carrying cattle or sheep.
Companies in breach of the new rules could face fines of Aus$4.2mn (US$3.1mn) and directors jailed for up to 10 years.
Animal welfare activists accused the government of "double standards" on animal protection, calling for a ban on live exports.
"If you leave a dog in a hot car (in Australia) you are prosecuted and you potentially go to jail," said Lyn White from Animals Australia, the advocacy group that released the shocking video.
"If you put tens of thousands of live sheep on a vessel that turns into an oven it's called a business," she told Sky News.
White said the government was putting industry ahead of science in continuing with the live trade, a sector she branded an "ethical abomination".
But a key agricultural lobby group welcomed the review's recommendations as a "crucial first step" toward reforming the industry.
"We support the future of the trade but there absolutely must be meaningful change," National Farmers' Federation president Fiona Simson said.
"Change that increases oversight and transparency, facilitates continuous improvement and most importantly, upholds animal welfare to the standard expected by all reasonable Australians."
Australia's live animal export trade, worth more than Aus$800mn annually, has been under scrutiny in recent years after footage shot at offshore abattoirs showed cattle being mistreated.