The unfair terms laws to protect small business are now before Parliament.

The Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 (the Bill) was introduced to the House of Representatives on 24 June 2015. If passed in its current form, the Bill will amend the Australian Consumer Law and the Australian Securities and Investments Commission Act 2001 to extend the unfair contract terms protections currently enjoyed by consumers to standard form, small business contracts that are valued below a prescribed threshold.

The Bill is substantially the same as the consultation draft released in May, and closely follows the consumer unfair terms laws. Please refer to our previous alert on the proposed laws here.

Small business test

Under the Bill, a contract is a small business contract if:

  1. when the contract is entered into, one contract party is a small business with fewer than 20 employees (a casual employee is not counted unless employed by the business on a regular and systematic basis); and
  2. the upfront price payable under the contract does not exceed $100,000 or, if the contract has a duration of more than 12 months, the upfront price does not exceed $250,000.

Narrow exemption

The Bill contains a very narrow power to exempt small business contracts that are subject to a prescribed law identified by regulation. For a law to be eligible to be prescribed, the Minister must first be satisfied that the law provides “equivalent protections” to the unfair terms laws to a business employing fewer than 20 people. The narrow scope of the exemption means few, if any, laws are expected to qualify for listing.

Timing for commencement of new law

We understand the Government intends to progress the Bill fairly quickly when Parliament resumes in August. Once the Bill is passed, there will be a 6 month period before the new laws start.