The national intelligence watchdog has warned federal politicians that laws tied to setting up the new Home Affairs portfolio could seriously undermine her independence.
Inspector-General of Intelligence and Security Margaret Stone said allowing the attorney-general as well as the prime minister to compel her office to investigate security matters would intrude on its autonomy.
"The independence of this office is its most important asset," Ms Stone told a parliamentary inquiry in Canberra on Wednesday.
The watchdog scrutinises ASIO, ASIS, the Australian Signals Directorate, the Office of National Assessments, the Defence Intelligence Organisation and the Australian Geospatial-Intelligence Organisation.
Ms Stone said new powers contained in the legislation would open the attorney-general, who authorises warrants requested by ASIO, to a perceived conflict of interest.
"To add another minister - particularly one authorising aspects of an agency's activities which are a key part of our scrutiny - is to play into not only substantive compromise of our independence but also perceived," she said.
"To my mind actual and perceived independence are equally important."
Ms Stone told members of the high-powered intelligence and security committee "the single most cynical, sceptical, critical comment" raised by members of the public was that her agency was not truly independent.
The Inspector-General of Intelligence and Security was established to ensure the public and parliament could be confident of transparent and rigorous scrutiny over the enormous powers held by security agencies.
Ms Stone said the new laws would double the potential for interference in her office's operations.
"To bring the attorney-general in as an additional minister - and with his compromise - creates a big problem for that perception," she said.
The inspector-general said she was not assuming bad faith on anyone's part or suggesting present or future attorneys would misuse their powers.
"But the reality of independence must be actual and not perceived," Ms Stone said.
