Under the changes, social media companies could be fined almost $99 million for failing to enforce the national ban on those younger than 16 - double the previous maximum penalty.
Tech platforms will also be forced to reveal their activities to stop children and teens accessing accounts as part of an expected beef-up of regulatory powers.
Social media giants need to do more to protect young people from dangerous content online, Treasurer Jim Chalmers said.
"We will do more because the big tech companies aren't doing enough," he told ABC's Insiders program on Sunday.
"We recognise that the future of our kids, the safety of our kids, is too important to let the big tech companies wriggle off the hook or avoid their responsibilities."
No penalties have been issued to tech companies for non-compliance under the existing enforcement regime.
Given Australia was the first country in the world to attempt such a ban, tweaks were always likely to be needed, fellow frontbencher Murray Watt said.
"These laws were brand new, never developed anywhere in the world, and what we've learned is that the powers the eSafety Commissioner has do need to be beefed up," he told Sky News.
Senator Watt pointed to moves by other countries - including the UK, Canada, France and Greece - to follow Australia's lead and ban children from social media as evidence the age restrictions were working.
But opposition education spokesman Julian Leeser said it was clear Labor "fumbled" the ban, which the coalition had supported.
"There''s clearly people who are subverting the social media ban ... (and) big tech haven't taken this seriously enough," he said.
Australia introduced a world-first ban on children younger than 16 holding accounts on platforms such as Instagram, Snapchat, TikTok, Reddit, Facebook and YouTube in late 2025.
While the government says more than five million social media accounts have been deleted, research suggests children are easily skirting age verification and other restrictions put in place by the platforms.
As many as 85 per cent of children younger than 16 reported using social media after the ban came into force, according to recent University of Newcastle-led research.
The rules require social media companies to take reasonable steps to stop underage users from holding accounts.
Under changes proposed by the federal government, the eSafety Commissioner would be able to require social platforms to provide evidence they are taking steps to prevent anyone younger than 16 from creating an account.
The new powers for the independent regulator would extend to information held by third parties, such as age assurance and app-store providers.
The age ban has been contested by tech companies, with separate court challenges lodged by Reddit and a pair of teenagers backed by the Digital Freedom Project.
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