New guidelines for how government agencies block illegal websites have been criticised for not addressing transparency concerns.

A federal parliamentary committee has been looking at the use of a little-known section of the Telecommunications Act, Section 313 (3).

It lets agencies, such as police, block websites without telling internet users why they have been taken down.

So far Section 313 has been mainly used by the Australian Federal Police (AFP) to block child sex abuse material and the Australian Securities and Investments Commission (ASIC) to bring down fraudulent websites.

But an attempt by ASIC to block fraud sites in 2013 went wrong when an additional 250,000 innocuous web addresses were also taken offline, with no notification given as to why the sites were inaccessible.

The chair of the House Committee, Liberal MP Jane Prentice, said there were good reasons for government agencies to block websites.

"There was an example where Telstra blocked 84,000 attempts by Australians to access child pornography. So clearly there are people attempting to do the wrong thing, and that's where Section 313 is required," she said.

She said some grey areas remained about who could request sites to be taken down, prompting the recommendation for new guidelines.

"It would seem that the ASIC example was one where the officer responsible probably didn't have the appropriate technical ability to do what they intended to do, which is why the excessive number of sites were blocked," Ms Prentice said.

Only law enforcement agencies should use Section 313: lawyer

While those guidelines aim at ensuring the wrong websites are not brought down in future, several groups said the real concern was about the broad scope for use of Section 313.

Aside from the AFP and ASIC, the provision has also been used by an undisclosed agency within the Attorney-General's Department to block a website for counter-terrorism reasons.

Roslyn Cook from Australian Lawyers for Human Rights said there were real transparency concerns.

"We think only specified law enforcement agencies should be permitted to use Section 313 to disrupt online services," she said.

"We don't think it should be any agency and we think they should only be able to make a request when an offence actually has been committed, not just only when they think that one might be committed."

The report recommends users trying to access a blocked website be notified of which agency blocked it and why.

Extraordinary element of risk: Ludlam

But the Greens senator Scott Ludlam said that did not go far enough to improve transparency.

He said the committee had squandered a golden opportunity to scrutinise the regulatory oversight of website blocking, just as the Government sought to introduce legislation to establish a separate mechanism to crack down on internet piracy sites.

"I think it introduces an extraordinary element of risk and discretion that agencies can effectively, just with no more than a phone call or a piece of paper, take particular internet sites offline," Mr Ludlam said.

"Because at the same time as the committee has said there's nothing to worry about with Section 313 site blocking, the Attorney-General's Department has got a bill before the Parliament ... to be able to block sites that they believe are infringing copyright.

"So we've effectively got two separate site blocking regimes, one of them proceeding via legislation where a court order would be required to pull down sites that copyright holders were worried were infringing copyright.

"And on the other hand, this almost completely unregulated system where other agencies can pull down sites as well."

But some stakeholders, such as Laurie Patton from the internet users group Internet Australia, believe new guidelines will ensure appropriate oversight for how Section 313 is used.

"What the committee has basically said is that it wants a whole-of-government approach with guidelines that are established by the Communications Department stating who can seek and obtain the right to block websites, and it will be reported on and made public so I think that probably covers that issue," he said.

"While the report doesn't recommend all that we proposed, the recommendations made would, if effectively implemented, reduce many of the current problems associated with Section 313".

The recommendations are now being considered by Communications Minister Malcolm Turnbull.