Travelers who refuse to hand over their phone or laptop passwords to Customs officials can now be slapped with a $5000 fine.

The Customs and Excise Act 2018 – which comes into effect today – sets guidelines around how Customs can carry out "digital strip-searches".

Previously, Customs could stop anyone at the border and demand to see their electronic devices. However, the law did not specify that people had to also provide a password.

The updated law makes clear that travellers must provide access – whether that be a password, pin-code or fingerprint – but officials would need to have a reasonable suspicion of wrongdoing.

"It is a file-by-file [search] on your phone. We're not going into 'the cloud'. We'll examine your phone while it's on flight mode," Customs spokesperson Terry Brown said.

If people refused to comply, they could be fined up to $5000 and their device would be seized and forensically searched.