An independent administrator will be appointed to quash alleged corrupt behaviour within the CFMEU.
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Following reports of criminal misconduct and bikie links within the union's construction arm, a court application will be made by the Fair Work Commission to nominate an independent administrator.
If these moves are challenged, the government will introduce legislation to clear a path and ensure the construction division of the union is put into administration, Workplace Relations Minister Tony Burke said.
"The number one job of any union is to look after its members ... the reported behaviour for the construction division of the CFMEU is the exact opposite of that obligation," Mr Burke told reporters in Canberra on Wednesday.
"It's abhorrent, it's intolerable.
"There can be no place for criminality or corruption in any part of the construction industry."
A Labor government took similar action in 2012 when the Health Services Union was embroiled in controversy over fraud and theft charges.
Prime Minister Anthony Albanese said the government was acting swiftly and further action was possible.
"We see wrongdoing, and we have acted," he told reporters in Brisbane.
"Nothing will be taken off the table."
The Fair Work Commission's general manager Murray Furlong said his organisation was undertaking careful analysis of the allegations and seeking advice on a Federal Court application.
"I am deeply concerned about the alleged conduct and commentary that organised crime has infiltrated several state branches of the division, including that it appears to be embedded and ongoing," he said in a statement.
Mr Furlong also revealed he had shared information with other regulatory and law enforcement bodies about the allegations.
Opposition Leader Peter Dutton said the government had given the "weakest possible response" and urged it to deregister the union and revive the construction industry watchdog.
"They are a discredited organisation," he said.
"What we're seeing at the moment from the CFMEU: their thuggish behaviour, the criminal conduct, we're only just scratching the surface."
However, RMIT's business and law school professor Anthony Forsyth says resurrecting the Australian Building and Construction Commission would not fix issues within the union as it does not have power to deal with criminal behaviour.
Similarly, grounds for deregistration involves industrial misconduct like unlawful industrial action, rather than alleged criminal behaviour.
Master Builders Australia has welcomed the government's announcement, claiming the union's culture has stifled productivity and increased the cost of construction at the expense of the community, taxpayers, jobs and small business.
"It is also an important first step towards stamping out the toxic and ingrained culture within building unions of bullying, thuggery, and complete disregard for the law," they said in a statement.
The CFMEU's national office has already placed its Victorian and South Australian branches into administration and launched its own investigation, but concerns have been raised over its independence.
NSW Premier Chris Minns has also asked the state's Labor general secretary to suspend its affiliation with the CFMEU following corruption claims.
Mr Burke has also requested the Fair Work Ombudsman review enterprise agreements made by the Victorian branch of the CFMEU's construction division after a request from the Victorian premier.
He stressed the government was only seeking information on coercive behaviour and had no intention of taking action that would risk terms and conditions of employment for those under the agreements.
"This is not their fault," he said in a statement.
The Australian Federal Police have also been called to investigate the allegations with state forces.
Australian Associated Press
