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Extending unfair contract term protections to small businesses

2 November 2016

The Government has delivered its commitment to give Australian small businesses a ‘fair go’ by extending to small businesses the unfair contract term protections that are currently available for consumers.

On 12 November 2015, the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 received Royal Assent. The new Law will come into force on 12 November 2016 following a 12 month transition period.

Under the new Law a small business will be able to have an unfair term in a contract declared void by a court if, at the time of agreeing to a standard form contract, it had fewer than 20 employees and the contract did not exceed $300,000 (or $1 million for contracts longer than 12 months).

To help businesses comply with the new Law, the Australian Competition and Consumer Commission (ACCC) will be working closely with businesses during the transition period. For further information you can visit the ACCC website.

Exemption Mechanism

The Law also includes a mechanism for exempting certain contracts from these protections where those contracts are subject to equivalent and enforceable protections under a law that is prescribed by regulation. The purpose of this mechanism is to avoid regulatory duplication.

Before a law is prescribed, the Small Business Minister and Assistant Treasurer must be satisfied that it provides equivalent and enforceable protections for small business, taking into consideration: any detriment to small businesses resulting from prescribing the law; the impact on business generally resulting from prescribing the law; and the public interest. The Minister will also consult with relevant state and territory Ministers as required by the Intergovernmental Agreement for the Australian Consumer Law and the Corporations Agreement 2002.

Stakeholers were asked to nominate laws for consideration under this mechanism by 29 February 2016. To date, no exemptions have been granted.

Please contact Shelby Schofield, Consumer Policy Unit on: +61 2 6263 3314 or for further information.

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