The code, known as the International Mobile Equipment Identification (IMEI) number is broadcast to the network when a phone is use. Mobile operators can use it to block phones listed as stolen.
Australia is one of the few countries in the world in which all domestic mobile operators have agreed to block stolen phones, a move they took at the urging of the government which was concerned at the growing rate of phone theft.
But thieves have learnt how to reverse-engineer the chip that holds the IMEI so as to bypass the block. Instructions and tools can be downloaded from the Internet.
"However at present it is not illegal to change a telephone's IMEI and thereby evade a mobile telephone block, although in some cases it would amount to fraud," said Senator Richard Alston, the Minister for Communications, Information Technology and the Arts.
"The proposed offence will criminalize the illegitimate modification of a mobile telephone's IMEI."
Britain is also considering banning the tampering of IMEIs. The IMEI of most phones can be seen by pressing *#06#
While such a law is hard to enforce, it will make those wishing to use stolen phones think twice, as punishments will be harsher for those caught using phones with tampered IMEIs. However, in the rest of the Asia-Pacific, trade in phones of uncertain origin is rampant as few operators enforce IMEI blocking.
The Philippines is one exception. On the National Telecommunications Commission Web site, it is possible to check for banned IMEI handsets. In Singapore, however, regulator Infocomm Development Authority (IDA) has been reluctant to implement the system.
"From the commercial perspective, phone tracking or blocking systems is costly, can cause network delays, and is technology-dependant," said Dulcie Chan, IDA spokesperson. "This is compounded by administrative difficulties associated with fast churn of handsets prevalent in the consumer market and a relatively short economic lifespan of handsets today."
ZDNet Australia and CNETAsia's Aloysius Choong contributed to this report.