Crackdown on Unfair Contract Terms to protect small businesses

The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has welcomed a national agreement to strengthen protections for small businesses from Unfair Contract Terms.

Assistant Treasurer Michael Sukkar announced that Commonwealth and state and territory governments have agreed to make unfair contract terms unlawful, giving courts the power to impose a civil penalty when a breach occurs.

“The government has clearly listened to the concerns my office has long held in relation to the impact of unfair contract terms imposed on small businesses by big businesses,” she says. “Importantly these reforms will ensure unfair contract terms are illegal and the courts will have the power to levy penalties for breaches.

“Equally, we welcome the expansion of the definition of small business to under $10 million turnover or up to 100 employees, which means 99% of businesses will be afforded these protections.

“The removal of the requirement for a contract to be below a certain threshold also represents significant progress for small businesses.

“While these reforms do offer small businesses more confidence to enter into a contract with a larger business, it is disappointing that unfair contract terms will still need to be decided by the courts.

“This has proven to be a significant barrier for small business as pursuing legal action is a costly, stressful and time-consuming exercise.

 “That’s why my office continues to recommend giving the regulators additional powers to penalise businesses found to have imposed unfair contract terms on a small business.

“It’s also crucial these reforms apply to government contracts, which often impose unfair contract terms on small businesses.

“We look forward to seeing draft legislation to ensure these necessary reforms come to fruition as a matter of urgency.”