Preparing to introduce legislation that will expand ASIO's surveillance powers: Attorney-General George Brandis.

Preparing to introduce legislation that will expand ASIO's surveillance powers: Attorney-General George Brandis. Photo: Glenn Hunt

The federal government is putting aside one of the national security reforms most keenly sought by spies and police, in which phone and internet providers have to keep customers' records for up to two years.

A senior source said the government was ''not proposing'' a so-called data-retention scheme ''at this stage'', despite a strong push by the government to beef up intelligence and counter-terrorism capabilities over concerns about Australian jihadists abroad.

Britain is going ahead with data-retention laws that would force internet providers to store information such as the time and destination of phone calls, text messages, emails and Skype calls for up to a year.

The Australian Security Intelligence Organisation and the Federal Police have been calling for similar laws to have records kept for up to two years.

They say the law needs to keep up to date with technology as more people use the internet to communicate rather than using traditional phones, the records of which are kept automatically by providers for billing purposes.

Web-based communications, by contrast, are charged by the amount of data used, meaning providers do not typically keep records of individual communications.

Without being able to go back and check a person's internet communications, crucial investigations and prosecutions against terrorism and other criminal suspects, including child pornographers, will increasingly have to be abandoned, they say.

It is understood the government is waiting on the recommendations of a Senate inquiry into the Telecommunications Interception and Access Act. It is examining data retention but may recommend against such a proposal.

Attorney-General George Brandis is preparing to introduce legislation next week that will expand the surveillance powers of ASIO and other intelligence agencies.

Among other things, it would enable them to hack into a third party's computer to access a target computer, and infiltrate entire computer networks on a single warrant.

Senator Brandis has also foreshadowed other security reforms later in the year amid fears about dangers posed by up about 150 Australians involved in extremist groups such as the Islamic State of Iraq and the Levant, which has seized large tracts of territory straddling Iraq and Syria and declared a caliphate.

The last parliamentary inquiry to consider the data-retention issue - while Labor was in office - reached no conclusion and decided the issue had such serious privacy implications that more work was needed.

Labor shelved any data-retention plans after the inquiry. On Friday a spokeswoman for shadow attorney-general Mark Dreyfus said the opposition would examine any legislation the government put forward but noted any scheme would need ''appropriate safeguards and oversight''.

A spokesman for Senator Brandis declined to comment.

Under data retention, only the fact that a communication has been made is recorded, not necessarily the content. ASIO has compared it to the outside of an envelope sent by mail, as opposed to the letter inside.