From 1 July 2021, the monetary threshold for determining whether a person acquires goods or services as a "consumer" will increase from $40,000 to $100,000 under section 3 of the Australian Consumer Law (ACL). The amendment broadens the scope of the consumer guarantee protections available to consumers and as such is likely to apply to more business to business transactions.
What you need to know
The amendment to the definition of a “consumer” was introduced in July 2020 by way of the Treasury Laws Amendment (Acquisition as Consumer - Financial Thresholds) Regulations 2020 (Cth) (Regulations).
Broadly, the definition of “consumer” in the ACL applies to the following protections:
- Consumer guarantee provisions;
- Unsolicited consumer agreements; and
- Lay-by agreements.
The Regulations also apply to the definition of ‘consumer’ for the purposes of the acquisition of financial services per section 12BC of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). Therefore, a person will be considered a “consumer” under section 12BC of the ASIC Act where they have acquired a financial service that did not exceed $100,000.
The introduction of the Regulations in 2020 followed recommendations from the Australian Consumer Law Review, which concluded in 2017.
The review highlighted that the original threshold of $40,000 had remained unchanged since its introduction in 1986 and had not been adjusted for CPI. As a result, “the level of protection offered to consumers (including small businesses) had been eroded due to inflation in the cost of goods and services over time” as stated in the Explanatory Statement.
It also noted that by increasing the monetary threshold in the definition of “consumer” it would ensure that the ACL remains “fit for purpose” and restore the level of coverage for business purchases that had been progressively reduced over time.
Recap of the consumer guarantee provisions
The non-excludable guarantees which apply to goods and services supplied to a consumer are set out in Chapter 3, Pt 3-2 of the ACL and summarised in the table below.
Guarantee that goods supplied
Guarantee that services supplied
|1. have clear title.||1. are provided with due care and skill.|
|2. come with undisturbed possession.||2. are fit for purpose.|
|3. are free from securities.||3. are delivered within the stated time or if no time stated, within a reasonable time.|
|4. are of acceptable quality.|
|5. are fit for purpose.|
|6. comply with their description.|
|7. correspond with the sample or demonstration.|
|8. comply with any express warranties.|
|9. will have reasonable availability of repair and spare parts.|
Practical steps to implement by 1 July 2021
Businesses which sell or supply goods or services to consumers with a value up to $100,000.00 are required to comply with the consumer guarantee provisions in the ACL and should:
- Consider whether your goods or services fall within the new threshold and whether they comply with the consumer guarantee provisions in the ACL. This may involve confirming whether a customer is buying for the purpose of resupplying those goods, in which case the ACL may not apply.
- Review the terms and conditions of standard contracts for the supply of goods and services to ensure the terms are compliant with the consumer guarantee provisions.
- Review marketing materials and product descriptions for compliance, including product packaging.
- Review any express warranties against defects that are offered by your business.
- Update employees on the changes to the ACL to ensure that they understand the protections and remedies available to consumers. A recent ACCC investigation involving a major caravan manufacturer highlights the importance of educating staff. In this case the Federal Court found that the manufacturer had made a false or misleading representation to one of its consumers about their consumer guarantee rights under the ACL. Specifically, that the consumer was only entitled to a repair when consumer guarantee provisions in the ACL provided that the consumer was entitled to a refund or replacement.