Clause 2 of Schedule 1 of the Smart Device Rules 2025 sets out the password security requirements for the Australia Cyber Security Act 2024 smart device compliance checklist. These requirements apply to passwords used with the hardware of the product (when not in factory default state), pre-installed software, and any software that must be installed for the manufacturer's intended purposes. The password checklist items below cover both the unique per product model and the user-defined model. The definition of password in Clause 1 of Schedule 1 excludes cryptographic keys, personal identification numbers used for pairing in communication protocols that do not form part of the internet protocol suite, and application programming interface keys.
The Rules define 'unique per product' as unique for each individual product of a given product class or type. This means every single manufactured unit must have a different password. The Rules also define several prohibited derivation methods in Clause 2(3). Passwords must not be based on incremental counters (such as 'password1' and 'password2'). Passwords must not be based on or derived from publicly available information. Passwords must not be based on or derived from unique product identifiers such as serial numbers, unless the derivation uses an encryption method or keyed hashing algorithm accepted as good industry practice. Passwords must not be otherwise guessable in a manner unacceptable as part of good industry practice.
Good industry practice is defined in Clause 1 of Schedule 1 as the exercise of that degree of skill, diligence, prudence, and foresight which would reasonably and ordinarily be expected from a skilled and experienced cryptographer engaged in the same type of activity. This definition sets a high bar. A password generation scheme reviewed only by software developers, without input from a qualified cryptographer, may not meet this standard for this Australia Cyber Security Act 2024 smart device compliance checklist.
If your product ships with no password and requires the user to set one during initial setup, the user-defined model under Clause 2(2)(b) applies and the prohibited derivation restrictions in Clause 2(3) do not apply. However, you must verify that the product cannot be used in any meaningful way without the user first setting a password. A product that can be operated, configured, or accessed over a network without authentication fails this section of the Australia Cyber Security Act 2024 smart device compliance checklist.
Practical testing criteria for password security: Sample at least 20 units from different production batches. Extract the factory password from each unit and confirm every password is different. Verify no password follows an incremental counter pattern by checking for sequential characters across units. Confirm that no password can be derived from publicly visible information on the product packaging, label, or documentation. If passwords are derived from product identifiers, obtain the cryptographic design document and confirm a qualified cryptographer has reviewed the encryption method or keyed hashing algorithm. For the user-defined model, attempt to operate the product in a meaningful way without setting a password, including network access, configuration interfaces, and data retrieval.