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The office of Commonwealth Ombudsman is created by the Ombudsman Act 1976.

The Ombudsman Act provides that the Ombudsman is to investigate the administrative actions of Australian Government departments and agencies and sets out the limits on his jurisdiction. For example, the Ombudsman may not investigate some actions related to Australian Government employment, or the actions of judges and ministers. The Act provides the Ombudsman with an extensive range of powers to investigate actions following complaints or on his own motion and permits him, in some circumstances, to decline to investigate; for example, the Ombudsman may decline to investigate until a matter has been raised with the relevant agency.

The Ombudsman Act enables the Ombudsman to report in a number of ways following an investigation, although it requires the investigation itself to be conducted in private and with fairness to anyone likely to be criticised.

Changes to the Ombudsman Act in December 2005 give the Commonwealth Ombudsman jurisdiction to investigate the actions of Commonwealth Service providers as if the relevant department or authority had taken those actions.

This means that the Ombudsman may investigate the delivery of goods or services by a contractor to members of the public.

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