New CTH Regulation Increases Monetary Threshold to Expand Consumer Protection

On 13 July 2020, the Treasury Laws Amendment (Acquisition as Consumer—Financial Thresholds) Regulations 2020 (Cth) (‘the Regulations’) were notified. The primary purpose of the Regulations is to give effect to proposal 15 of the Australian Consumer Law Review which recommended increasing the monetary threshold in the definition of ‘consumer’ for the purposes of the Australian Consumer Law which is found in Schedule 2 of the Competition and Consumer Act (Cth) (‘the ACL’).

ACL Review

In June 2015, Consumer Affairs Australia and New Zealand (CAANZ) began conducting the ACL Review for the purpose of reviewing the effectiveness of ACL provisions and proposing recommended reforms. Notably, it is the first comprehensive review of the ACL since its introduction in 2011. The Final Report was published in April 2017.

Under the ACL, if a person acquires goods where the amount paid or payable for the goods does not exceed $40,000, the person is considered a consumer. This is only one of a series of statutory tests used to define a person as a consumer. The definition of ‘consumer’ establishes the categories of purchases where certain guaranteed consumer protections apply. The purpose of the monetary threshold is to provide consumer protection to persons, including small businesses, who do not fall within the other definitions of consumer, namely because they do not purchase the goods for personal, domestic or household use. 

Proposal 15 of the ACL Review recommended that the monetary threshold in the definition of ‘consumer’ be increased from $40,000 to $100,000. The ACL Review noted that this threshold has not been updated since 1986 and consequently, “the scope of purchases protected by the ACL has eroded over time due to the impact of inflation”. In a 2018 Regulatory Impact Statement (RIS), it was noted that amending the monetary threshold would accord with the original policy objectives of the provision, namely the protection of individuals and small businesses. The RIS referenced the 1976 Swanson Report, which stated the importance of consumer protections for small businesses, particularly in being able to ‘redress,  between  supplier  and  customer,  inequalities  in  the  technical  expertise  required  to  recognise,  and  the  bargaining  power  to  negotiate, a fair bargain’.

Amendment to the Definition of ‘Consumer’

The Regulations amend the Competition and Consumer Regulations 2010 (Cth) such that the monetary threshold for the purposes of defining a ‘consumer’ is $100,000, as recommended by the ACL Review. Secondly, the Regulations also amend the Australian Securities and Investments Commission Regulations 2001 (Cth) such that the monetary threshold for defining a consumer under the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act’) is also $100,000. The Explanatory Statement states that while the ACL is a generic law applying to all economic sectors, specific and separate laws are established in the ASIC Act dealing with financial products and services. Thus the latter amendment ensures that consumer protection provisions under the ASIC Act are consistent with the ACL.

Impact of Regulations

The Regulations will commence on 1 July 2021 and the amended definition of ‘consumer’ will apply in relation to goods or services acquired on or after this date.

According to the RIS, the amended threshold will provide consumer protection to small businesses who were previously reliant on limited alternative legal avenues such as claims of contract law or negligence. The Explanatory Statement summarises the consequential benefits of the amendments stating:

However, the RIS also noted that the amendment will potentially result in one-off compliance costs to suppliers of such goods. These compliance costs could include new record-keeping mechanisms and training costs to ensure compliance with legal obligations. Further, the RIS acknowledged that since there will be a wider range of purchases eligible for ACL protections, there is potential for increased financial loss due to increased claims, compensations and other forms of redress, and insurance premiums.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.

 Treasury Laws Amendment (Acquisition as Consumer—Financial Thresholds) Regulations 2020 and Explanatory Statement, available from TimeBase's LawOne service