As part of the changes to the planning laws, the government will introduce a three-tiered system based on the seriousness of the offence under the Environment Planning and Assessment Act.

Currently, all offences under the Act carry a maximum penalty of $1.1 million and fines have not increased since 1999.

The changes will also upgrade the offence of providing false or misleading information in environmental impact statements and make clear that it is an offence to not declare political donations made by directors of companies related to development applicants, in addition to political donations from the applicant themselves.

"The community rightly believes the punishment should better fit the crime and while most businesses are law-abiding corporate citizens, current fines are no longer a strong enough deterrent," Goward said.

“That’s why the NSW Government will introduce laws to increase the maximum penalty the Land and Environment Court can impose to $5 million.

“The Court has been reluctant to impose the maximum penalty, so introducing a tiered system makes clear the Government’s intentions and encourages higher penalties for the worst offences.”

The three tiers of offences

Tier 1: Applies to the most serious offences, such as carrying out development without approval or outside of existing approvals, or contravening a development control order, where the offence was committed intentionally and caused, or was likely to cause, significant harm to the environment or the death or serious injury or illness of a person.

Maximum penalty: $5 million for corporations and $1 million for individuals.

Tier 2: Applies to tier one offences that were unintentional or did not cause, or were not likely to cause, significant harm to the environment or the death or serious injury of a person. For example, accidentally spilling waste into a stream, which was cleaned up quickly, minimising the effect on the environment.

Maximum penalty: $2 million for corporations and $500,000 for individuals.

Tier 3: Applies to less serious offences. For example, a mine failing to meet dust and noise monitoring requirements or providing false or misleading information in relation to meeting a condition of approval.

Maximum penalty: $1 million for corporations and $250,000 for individuals.

The Environmental Defenders Office (EDO) has welcomed the proposed changes to the penalties and executive director Jeff Smith told the ABC News the changes are in line with what the organisation has recommended.

"It's certainly a very good start, we have long called for the government to give more direction to the Coutts and if fact, we recommended a tiered approach in very similar terms to what they've done here," Smith said.

"We fully support the reforms that have been indicated here."

However, he added that it is now up the to the Land and Environment Court to enforce the new maximums as they can still "go below that".

"But it certainly does give clear direction to the Court about where a particular level of breach should be dealt with, and therefore should allow for greater consistency across those penalties that are awarded by the courts," Smith said.

Amendments to the legislation to give effect to the new penalties are intended to be introduced within the next month.