2 April 2021
What you need to know
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From 1 July 2021, a "consumer" will include anyone who acquires goods for an amount not exceeding $100,000, irrespective of whether the goods are purchased for personal, domestic or household use.
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The new threshold purchase price significantly exceeds the current threshold of $40,000, meaning that a larger number of transactions will fall under the ambit of the Australian Consumer Law.
What you need to do
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Businesses should be aware that customers (which includes natural persons and small businesses) purchasing goods or services for a value not exceeding $100,000 will be now be protected by the Australian Consumer Law, including the non-excludable consumer guarantees.
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This is a good reminder for businesses to ensure that employees are familiar with the consumer guarantees and are aware that a large number of goods and services purchases will soon be protected by the consumer guarantees.
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Businesses should also have policies in place to respond to consumers who assert their consumer rights under the Australian Consumer Law to avoid any potential penalties from the ACCC for non-compliance.
What are the changes?
A "consumer" is currently defined by the Australian Consumer Law (ACL) as a person who acquires goods for an amount not exceeding $40,000, or where the goods or services are purchased for personal, domestic or household use.
From 1 July 2021, the Treasury Laws Amendment (Acquisition as Consumer – Financial Thresholds) Regulations 2020 will amend the definition of "consumer" by increasing the existing $40,000 monetary threshold to $100,000.
This amendment is the realisation of a recommendation proposed by the Australian Consumer Law Review (Report), published in March 2017 by Consumer Affairs Australia and New Zealand.
The Report found that protection for consumers and small businesses provided by the ACL had been steadily eroded over time, and that an increase in the monetary threshold was necessary to account for inflation in circumstances where the existing $40,000 threshold was established in 1986.
What do the changes mean for consumers?
This amendment is significant as the application of many ACL consumer protection provisions is contingent upon a claimant establishing that they are a "consumer" as defined by the ACL.
The expansion of the monetary threshold from $40,000 to $100,000 will mean that the implied consumer guarantees for goods and services under the ACL will now apply to a much larger range of goods and services.
The consumer guarantees under the ACL are non-excludable and override any less favourable limited warranties imposed by a business.
The implied consumer guarantees under the ACL for goods include, but are not limited to, guarantees that:
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a good is fit for all purposes for which goods of that kind are ordinarily acquired, or for any purpose represented by the supplier or communicated by the consumer;
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goods will be of an acceptable quality;
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goods will match any description provided;
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spare parts and facilities for repair of a good is reasonably available; and
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any express warranties given by the manufacturer for goods will be complied with.
Similar guarantees apply to the provision of service including guarantees that:
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services will be provided with acceptable care and skill or technical knowledge;
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services are fit for the purpose agreed to; and
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services are delivered within a reasonable time where there is no agreed time stipulation.
When one considers how many goods and services are priced between $40,000 and $100,000 that will now receive the protections of the ACL, including the non-excludable consumer guarantees, this amendment will have significant implications for businesses.
What actions can businesses take to prepare?
To prepare for the amendment, businesses should review and update their complaint handling procedures and policies to ensure that employees who handle complaints and returns are aware of the expanded application of the ACL. The maximum civil penalty for providing false or misleading information about the existence, exclusion or effect of the consumer guarantees or remedies under the ACL is the greater of (a) $10,000,000; (b) three times the value of the benefit received, or (c) 10% of annual turnover in the preceding 12 months for corporations; and $500,000 for individuals.
Finally, small businesses that regularly purchase goods or services within the $100,000 monetary threshold should be aware that they will soon be eligible to seek the same remedies that have been available to consumers of smaller purchases under the ACL.
For further information, please contact:
Anita Cade, Partner, Ashurst
anita.cade@ashurst.com
