Fears that the Inner West's large sex industry will turn on itself and drive workers underground have surfaced after the passing of the Brothels Legislation Amendment Bill.

The new laws give councils greater power to crack down on illegal brothels, with the ability to close them after receiving just one complaint.

Under the act, which was passed in the upper house last week, the council can order the closure of illegal brothels within five working days, while local courts can order that gas and water supplies be cut off. A loophole allowing illegal brothel owners to possibly avoid prosecution by selling or transferring a lease has also been closed.

Joanne, an Inner West sex worker and spokesperson for the Sex Worker Rights Action Coalition, said the act was going to have a big impact in the area. She said larger brothels would dob in smaller brothels and workers' safety and sexual health would suffer. Local councils may also use their new-found power to make themselves look tough, she said.

Inner West councils already had a history of turning down brothel applications, despite them meeting all DA criteria, Joanne said.

For many in the industry there was no incentive to go through the council process because sex workers were not given fair treatment.

"They just turn it into a political issue," she said. "It's not conducive to an inclusive and positive system." Scarlet Alliance manager Janelle Fawkes described the act as draconian and said it had reversed the decriminalisation of the sex industry.

"The act includes a removal of natural justice which means that the sex industry is being dealt with differently than other industries," she said.

Ms Fawkes agreed competing businesses could also use the act to put each other out of business.

"We have grave concerns it may mean larger brothels may attack smaller brothels as they see them as competition," she said.

It could also lead to corruption where council officers take advantage of smaller operators, particularly those who work from home, Ms Fawkes said.

"This legislation could take us back to the days before decriminalisation, where to operate as a sex worker you had to pay-off somebody."

Ms Fawkes said the Independent Commission Against Corruption (ICAC) was already investigating Paramatta City Council over corruption allegations, and that should have been a warning to the Government.

AIDS Council of NSW/SWOP sex industry policy adviser Maria McMahon feared the new laws would send many workers "underground". "We're reversing the entire status quo in NSW from a decriminalised model to something that will criminalise some sectors of the industry," she said.

Sex workers protested outside Parliament House last Tuesday wearing paper bags over their heads to symbolise the return to the old "paper bag" days of corruption.

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