Unfair Contract Terms for Small Business in Australia: Penalties, Who Is Covered and Examples (2026)

This guide is based on the Australian Consumer Law (Competition and Consumer Act 2010, Schedule 2), the ASIC Act 2001, the Competition and Consumer Amendment (Unfair Trading Practices) Act 2026 and the ACCC page listed under Sources. Last checked 9 November 2026.

The unfair contract terms regime at a glance

What changed on 9 November 2023?

Before that date, an unfair term in a standard form small business contract was void, but there was no penalty for using one. The changes made by the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 did two main things:

• Penalties. A person contravenes the law if it makes a standard form consumer or small business contract containing an unfair term that it proposed (s 23(2A)), or if it “applies or relies on, or purports to apply or rely on” an unfair term (s 23(2C)). Each unfair term proposed is a separate contravention (s 23(2B)).
• A wider small business test. The old test was 20 or fewer employees and an upfront price under $300,000 (or $1 million for contracts over 12 months), according to the ACCC. The current test is fewer than 100 employees or turnover under $10 million, with no contract-value limit (s 23(4)).

Who counts as a small business?

A contract is a “small business contract” if it is for a supply of goods or services, or a sale or grant of an interest in land, and at least one party:

• “makes the contract in the course of carrying on a business and at a time when the party employs fewer than 100 persons”; or
• had turnover of less than $10,000,000 for its last income year that ended at or before the time the contract was made (s 23(4)).

Casual employees count only if employed on a regular and systematic basis. Part-time employees count as a fraction of a full-time equivalent (s 23(5)).

Either party can meet the test, so a small supplier on a large customer’s standard form is covered too.

What is a standard form contract?

The law does not give a fixed definition. If a party alleges that a contract is standard form, “it is presumed to be a standard form contract unless another party to the proceeding proves otherwise” (s 27(1)). A court must take into account (s 27(2)):

• whether one party has all or most of the bargaining power;
• whether that party has made other contracts on the same or substantially similar terms, and how many;
• whether the contract was prepared by one party before any discussion;
• whether the other party was, in effect, required to accept or reject it as presented;
• whether the other party had an effective opportunity to negotiate; and
• whether the terms take into account the other party’s specific characteristics or the particular transaction.

A contract can still be standard form if you negotiated minor changes or chose from the other side’s menu of options (s 27(3)). Online click-through terms, supplier terms of trade and software subscriptions are typical.

When is a term unfair?

All three of these must be met (s 24(1)):

1. it “would cause a significant imbalance in the parties’ rights and obligations arising under the contract”;
2. it is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by it; and
3. it would cause detriment, financial or otherwise, to a party if it were applied or relied on.

The court must take into account how transparent the term is and the contract as a whole (s 24(2)). A term is transparent if it is in reasonably plain language, legible, presented clearly and readily available (s 24(3)). The second limb works in your favour: a term is presumed not to be reasonably necessary unless the party it advantages proves otherwise (s 24(4)).

Examples of unfair contract terms

Section 25 lists examples of terms that may be unfair. They are examples, not a list of banned terms:

More detail: auto-renewal, limitation of liability and liquidated damages.

What cannot be challenged

Section 23 does not apply to a term to the extent it (s 26(1)):

• defines the main subject matter of the contract;
• sets the upfront price; or
• is required or expressly permitted by a Commonwealth, State or Territory law, or is included by such a law.

The upfront price is the consideration disclosed at or before the time the contract is made. It “does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event” (s 26(2)). So late fees, termination fees and price-rise mechanisms can still be reviewed.

Some contracts are outside Part 2-3 altogether, including marine salvage, towage, charterparties and sea carriage contracts, company and scheme constitutions, payment-system rules, certain financial market contracts, and small business contracts to which a prescribed law applies (ss 28, 28A).

Penalties and enforcement

A breach of s 23(2A) or (2C) is a civil penalty provision. For each act or omission, the maximum is (s 224):

• a company: the greater of $100,000,000; 3 times the value of the benefit obtained, if a court can work it out; or, if it cannot, 30% of adjusted turnover during the breach turnover period;
• an individual: $2,500,000.

The $100 million figure applies to acts or omissions on or after 28 March 2026, when the Treasury Laws Amendment (Doubling Penalties for ACCC Enforcement) Act 2026 commenced (s 310). For earlier conduct the company figure was $50 million.

A court may also grant an injunction against conduct that contravenes these provisions, on application by the regulator or any other person (s 232).

What your business can do about an unfair term

• Rely on it being void. If a term is unfair, it is void, and the contract continues without it if it can (s 23(1)-(2)). Only a court can finally decide that.
• Ask for a declaration. A court may declare a term of a standard form small business contract unfair on application by a party that met the small business test when the contract was made, or by the regulator (s 250(2)-(3)).
• Seek compensation or other orders. A person who suffers loss because of a contravention can apply within 6 years for orders, which can include declaring the contract void in part, varying it, refunding money or paying the loss (ss 237, 243).

Contracts made before 9 November 2023

The current rules apply to contracts made on or after 9 November 2023. An older contract comes under them from the day it is renewed, for conduct from that day (s 305(3)). If an older contract is varied by changing or adding a term, the current rules apply to that term (s 305(4)). Otherwise the earlier void-only protection applies.

Loans, insurance and other financial products

Contracts for financial products and financial services are covered by the ASIC Act instead of the ACL. The rules mirror the ACL, including penalties for proposing or relying on unfair terms (ss 12BF-12BM). Two differences: a small business contract’s upfront price must not exceed $5,000,000, with interest disregarded (s 12BF(4)-(5)), and a clearly disclosed insurance excess is excluded (s 12BI(1)(f)).

Coming on 1 July 2027

The Unfair Trading Practices Act 2026 adds subscription rules from 1 July 2027 that also cover small businesses on standard form contracts, including disclosure of renewal terms and an easy exit method. These are not law yet.

What our review checks

Upload the supplier, software (SaaS), equipment or service terms and get a plain-English report written for the small business customer, usually about 5 minutes after you pay. It:

• says whether the contract looks like a standard form contract, and whether your business may be a small business under the law
• checks the date rules: made, renewed or varied before or after 9 November 2023
• goes through the s 25 examples term by term, quoting each clause
• flags contingent fees that are not part of the protected upfront price
• gives you the specific changes to ask for

For each flagged term the report says why it may be unfair. It does not say a term “is void” or “is unlawful”: only a court decides that. It is not legal advice. You decide what to sign.

Get my business terms reviewed – $49

Questions people ask

What are the unfair contract terms laws for small business?

Under the Australian Consumer Law, an unfair term in a standard form small business contract is void. Since 9 November 2023, proposing or relying on one is also a contravention with penalties (ACL s 23). The ASIC Act has matching rules for financial products and services.

What counts as a small business under the unfair contract terms law?

A party that employs fewer than 100 people when the contract is made, or had turnover under $10 million in its last income year. Only one party to the contract needs to meet the test (ACL s 23(4)).

What are the penalties for unfair contract terms?

For a company, up to the greater of $100 million and 3 times the benefit or, if the benefit cannot be worked out, 30% of adjusted turnover, for conduct from 28 March 2026. For an individual, up to $2.5 million (ACL s 224). The company figure was $50 million for earlier conduct.

What is a standard form contract?

Broadly, a contract prepared by one side and offered on a take-it-or-leave-it basis. A court looks at bargaining power, whether the same terms are used with others, whether you could negotiate and other factors (ACL s 27). Once you allege a contract is standard form, it is presumed to be unless the other side proves otherwise.

What are examples of unfair contract terms?

The law’s examples include terms that let only one party terminate, vary the terms, or renew the contract; raise the price without a right to exit; unilaterally decide whether there has been a breach; or limit the other party’s right to sue (ACL s 25). They may be unfair, depending on the contract as a whole.

Can the price in my contract be an unfair term?

The upfront price disclosed when you made the contract cannot be challenged (ACL s 26). But charges that depend on an event, like late fees, termination fees or price rises during the contract, are not part of the upfront price, so they can be reviewed.

What happens if a term in my contract is unfair?

It is void, and the rest of the contract continues if it can operate without it. A court can also make orders for loss caused by a contravention, including refunds, on an application made within 6 years (ACL ss 237, 243). Only a court decides whether a term is unfair.

Do the rules apply to contracts signed before 9 November 2023?

From the day the contract is renewed, or to a term varied or added on or after that date (ACL s 305). Until then the earlier rules apply: an unfair term is void but there is no penalty.

Can my business ask a court to declare a term unfair?

Yes, if the contract is a standard form contract and your business met the small business test when the contract was made. A court may declare a term of a small business contract unfair on application by such a party or by the regulator (ACL s 250).

Is the business terms review legal advice?

No. It is a plain-English report that explains what the terms say, which ones may be unfair under the law and what to ask the other side to change. Claim Done is not a law firm.

Related guides

• Supplier and SaaS terms: unfair contract terms for small business
• Auto-renewal clauses and unfair contract terms
• Limitation of liability clauses explained
• Retail and commercial lease review: your state’s rules before you sign

Claim Done is not a law firm and does not give legal advice; this page is general information about Australian law as at 9 November 2026. Whether a term is unfair is for a court or tribunal to decide.

Sources (checked 9 November 2026)

• Competition and Consumer Act 2010 (Cth), Schedule 2 (Australian Consumer Law), Compilation No. 167 (ss 23-28A, 224, 232, 237, 243, 250, 305, 310)
• Australian Securities and Investments Commission Act 2001 (Cth), Compilation No. 109 (ss 12BF-12BM)
• Competition and Consumer Amendment (Unfair Trading Practices) Act 2026 (Cth), as made
• ACCC: contracts