Dodgy online betting agencies will have a harder time gaining a foothold in Australia after the Turnbull government launched an unprecedented intervention to dismantle Norfolk Island's wagering authority amid corruption concerns.

The Norfolk Island Gaming Authority exposed Australia's thoroughbred industry to global ridicule last year when it granted a national licence to BetHQ – closely linked to the world's biggest illegal bookmaker, Citibet.

The government subsequently ordered the authority to stop issuing new licences while audit firm Centium conducted a review. But now Territories Minister Fiona Nash says the authority will be scrapped altogether.

"Gambling in Australia must be carefully regulated to ensure the integrity of our sport and to protect consumers," Senator Nash said.