23 October 2018
Media Release - #2018025, 2018

Government to review extension of unfair contract terms to small business

The Government will review the effectiveness of protections for small business against unfair contract terms (UCTs). The UCT protections for small business have been in place since 12 November 2016. Two years on, the Government wants to ensure that the framework is operating effectively and that appropriate levels of protection are afforded to small businesses.

The Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 passed the Australian Parliament on 18 August 2015 and legislated to:

  • extend the consumer UCT protections in the Australian Consumer Law (ACL) and the Australian Securities and Investments Commission Act 2001 (the ASIC Act) to small business contracts that meet the prescribed criteria; and
  • make provision for exempting certain small business contracts from the operation of the legislation, where those contracts are subject to prescribed laws that are deemed equivalent to the UCT protections in the ACL or the ASIC Act, and which are enforceable.

The UCT protections currently apply to all small business contracts that meet the following criteria:

  • the contract is a standard form contract;
  • at the time the contract is entered, at least one party to the contract is a business that employs fewer than 20 persons; and
  • the upfront price payable under the contract does not exceed $300,000 or $1 million if the contract runs for more than 12 months.

The Government has recently legislated to give the Australian Competition and Consumer Commission (ACCC) and ASIC stronger powers to protect small businesses from UCTs. Under the Treasury Laws Amendment (Australian Consumer Law Review) Act 2018 which passed the Parliament on 18 October 2018, the regulators will have investigative powers to assess whether a term in a standard form contract may be unfair.

The review will commence in November 2018 and report to the Government by 1 February 2019. The review will be conducted by the Australian Treasury. Experience and views of stakeholders about the legislative settings will be sought during the review process.