As with the start of any Financial Year, a number of regulations and rules have been changed or amended across all level of governments. One of the bigger changes that has occurred is the expansion of the definition of ‘consumer’ under the Australian Consumer Law. This change was flagged to take place in the Treasury Laws Amendment (Acquisitions as Consumer Financial Thresholds) Regulations 2020. The change lies in the increase in the price cap for Category 1 consumers from $40,000 to $100,000 or less.[i] This change means that a greater number of your customers will now have the greater protections under a number of statutory provisions.
Why has this change come about?
Before the recent changes to the threshold, the amount was set at $40,000. It had been set there in 1986. The Australian Consumer Law Review: Clarification, simplification and modernisation of the Consumer Guarantee framework by Consumer Affairs Australia in 2018. The review found that the level of protection afforded to consumers had eroded over time as the decline in the real value of the threshold meant that certain purchases were no longer covered. Essentially, the impacts of inflation and rising costs of goods and services meant the threshold was too low to capture a number of purchasers who should be afforded the protections of a ‘consumer’.
So… what does this mean for your business?
If you operate and sell goods to people at under $40,000, there will be no impact or change to your business. Similarly, if your business sells goods and services to consumers with a price of $100,000 there will be no effect. However, if you operate in between these two thresholds there will be some significant changes. Businesses operating in this space will now owe their customers consumer guarantees.
The Australian Consumer law provides a number of guarantees including:
- Goods – will be of acceptable quality, will be fit for purpose, will comply with their description, will correspond with any sample or demonstration (if provided), will comply with any express warranties, will have clear title, will be free from securities and will come with undisturbed possession[ii]
- Services – will be provided with due care and skill, will be fit for purpose and will be delivered within the time stated (or if there is no time stated, within a reasonable time.[iii]
If your customer receives your goods or services, and is considered a ‘consumer’, any breaches of the consumer guarantees will entitle the customer to receive a remedy, such as a refund, repair, replacement and compensation for damage or loss.
What protections are available to me as a business owner?
Under Section 64 of the ACL, a business cannot contract out of consumer guarantees. However, businesses may be able to limit their liability thanks to Section 64A.
Some examples of ways businesses can protect themselves are listed below:
Limit liability on goods to:
- The cost of replacing goods.
- The repair of the goods.
- The payment of the cost of replacing goods.
- The payment of the cost of having the goods repaired.
Limit liability on services to:
- The cost of supplying the services.
- Paying to have the services supplied again.
How can a GKS Commercial Lawyer help?
It is imperative that if you now find your customers fitting under the $100,000 that your contract for goods and services has been updated to reflect the new regulations. A GKS Commercial Lawyer can provide updated contracts that include these provisions, as well as reviewing your current arrangements to make sure your business is protected from these updates.