Consumer guarantees and your compliance obligations as an Australian business

Every time your business sells goods or services to a consumer in Australia, the law attaches automatic promises to that sale. These promises are the consumer guarantees in the Australian Consumer Law (the ACL), which is Schedule 2 of the Competition and Consumer Act 2010 (Cth). They apply whether or not you mention them, you cannot charge for them, and you cannot switch them off with a sign, a receipt, or a line in your terms and conditions.

Getting them right is mostly a customer service exercise: clear policies, trained staff and accurate marketing. Getting them wrong is a legal problem. A refund you did not budget for is the cheap version. The expensive version is a false or misleading representation about consumer rights, which since March 2026 can attract penalties of up to $100 million for a corporation.

This guide sets out who the guarantees cover, the standards you must meet for goods and services, what you must do when a customer has a problem, the penalties for non-compliance, and the checklist to put in place this week.

Who the consumer guarantees apply to

The guarantees apply to supplies made in trade or commerce. Private one-off sales between individuals generally sit outside the ACL. Within trade or commerce, the trigger is whether the buyer is a consumer under s 3 of the ACL:

Price: the amount paid or payable is $100,000 or less.
Kind of goods or services: the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption, regardless of price.
Vehicles: the goods are a vehicle or trailer acquired for use principally in transporting goods on public roads.

The definition also excludes some business purchases. A buyer is not a consumer if the goods were acquired for re-supply, or for use up or transformation in a process of production or manufacture, or in the course of repairing or treating other goods (s 3(2) of the ACL).

The point that surprises most business-to-business sellers is that businesses can be consumers. An SME that buys a $30,000 machine, or a commercial cleaner that buys a $15,000 floor scrubber, is a consumer for ACL purposes, and the full suite of guarantees applies to that sale. The price threshold is not a "consumers only" rule; it is a "how much did it cost" rule.

There is a limited escape hatch for business supply. Under s 64A of the ACL, for goods or services that are not of a kind ordinarily acquired for personal, domestic or household use, a contract can limit liability for a guarantee failure to repair or replacement, or the cost of those things, as long as the limitation is fair and reasonable. For services the equivalent limitation is re-supply or its cost. This is why separate terms for consumer and business customers matter in practice. Note that the escape hatch does not cover the title and possession guarantees in ss 51 to 53.

The standards you must meet for goods

Supplying goods to a consumer carries six substantive guarantees, each a strict standard you cannot contract out of:

Acceptable quality (s 54): the goods must be fit for all the purposes for which goods of that kind are commonly supplied, acceptable in appearance and finish, free from defects, safe and durable. The test is what a reasonable consumer, fully aware of the state of the goods, would regard as acceptable having regard to the nature of the goods, the price, and any statements or representations made about them. A $50 kettle and a $500 kettle are judged against different expectations.
Fit for a disclosed purpose (s 55): if the customer tells you the purpose for which they need the goods, or you represent that the goods will serve a particular purpose, they must be reasonably fit for that purpose.
Match the description and the sample (ss 56 and 57): what you advertise, describe or display is part of what you must deliver.
Express warranties (s 59): any specific promise you or the manufacturer make about the goods, such as a stated battery life, must be honoured.
Title and possession (ss 51 to 53): you must have the right to sell the goods, the customer must have undisturbed possession, and the goods must be free of undisclosed securities or charges.
Spare parts and repairs (s 58): the manufacturer must take reasonable action to ensure repair facilities and parts are reasonably available for a reasonable period after supply, unless the customer was given written notice at the time of purchase that they would not be.

Two points follow. Caveat emptor has almost no role in consumer sales: the reasonable consumer test protects the buyer from hidden defects, and price is one factor among several rather than a defence. And the spare parts guarantee means your supply chain decisions, not just your point-of-sale behaviour, can create liability. If you import goods, note that under s 7 of the ACL an importer is treated as the manufacturer where the actual manufacturer has no place of business in Australia.

The standards you must meet for services

Services carry three guarantees:

Due care and skill (s 60): the service must be carried out competently and carefully, judged against what a competent provider in the field would do.
Fitness for purpose (s 61): the service must achieve the result the customer asked for, or the result you said it would achieve. This is why scope of work matters: if you promised a website that processes payments, delivering a static brochure page is a breach even if the page itself is well built.
Reasonable time (s 62): if the contract does not fix a time for supply, or a way of working it out, the service must be supplied within a reasonable time. What is reasonable depends on the nature of the service and the circumstances.

The test for due care and skill is objective: what a competent provider would have done in the circumstances, not whether you tried hard. A poor outcome can be a failure even where the work was done in good faith.

What you must do when a guarantee is breached

When something goes wrong, your obligations depend on whether the failure is minor or major, and whether you supplied goods or services. The distinction matters because it decides who gets to choose the remedy. The ACCC sets out the position in its guidance on repair, replace, refund and cancel. In short:

Minor failure, goods: If the failure can be remedied and is not major, the consumer can require you to remedy it within a reasonable time (s 259(2) of the ACL). You generally choose how to fix it, such as by repair, replacement or refund. If you refuse, or do not fix it within a reasonable time, the consumer can have the failure remedied elsewhere and recover the reasonable cost from you, or reject the goods and get a refund or replacement.
Major failure, goods: A failure is major if, broadly, the goods are unsafe, are very different from the description or sample, would not have been bought by a reasonable consumer who knew about the problem, or are substantially unfit for their common or disclosed purpose and cannot easily be remedied within a reasonable time (s 260 of the ACL). The consumer then chooses the remedy: a refund or replacement, or keeping the goods and claiming compensation for the drop in value (s 259(3)).
Minor failure, services: The consumer can require you to remedy the failure within a reasonable time. If you do not, they can have the service performed again elsewhere and recover the cost, or terminate the contract (s 267(2) of the ACL).
Major failure, services: A service failure is major if it creates an unsafe situation, would have stopped a reasonable consumer from buying, or leaves the service substantially unfit for its purpose and unable to be easily remedied in a reasonable time (s 268 of the ACL). The consumer can then terminate the contract and get a refund for the unused portion, paying a reasonable amount for work properly done, or keep the contract and claim compensation for the reduction in value (s 267(3)).

A few practical rules apply across all of these:

Consequential loss: Consumers can also claim compensation for loss that was reasonably foreseeable, such as extra costs caused by a delayed delivery (ss 259(4) and 267(4) of the ACL).
Refunds: A refund on a major failure is the full amount paid. You cannot deduct for the customer's use of the product, and the refund should be in the same form as the original payment unless you agree otherwise.
Proof of purchase: You can ask for a receipt or other proof of purchase, but you cannot insist on the original packaging.
Return logistics: The customer returns products that can be posted or easily returned. For large, heavy or hard-to-remove items, you arrange collection and pay the shipping. If you confirm the product is faulty, you reimburse reasonable return costs the customer has paid.
Repair notices: When repairing electronic products such as phones, computers and music players, you must warn the customer if stored data could be lost and if refurbished parts may be used.
Manufacturer fault is not a defence: You are responsible to the customer even if the manufacturer caused the problem, and you should not send the customer to the manufacturer. Where the manufacturer is at fault, you can seek reimbursement from it under the ACL, and the customer can also claim directly against the manufacturer for the drop in value (s 272 of the ACL).
Reasonable time is a judgement call: There is no fixed definition. What is reasonable depends on the nature of the product or service, and regulators assess it case by case. The ACCC's example is that repairing an installed dishwasher can reasonably take longer than repairing a pair of trousers in store.

You also do not have to provide a remedy where the customer changed their mind, caused the problem by misusing the product, knew about the problem before buying, or asked for a service to be done a particular way against your advice.

What you cannot do

The guarantees and their remedies cannot be excluded, restricted or modified. A term of a contract that purports to do so is void (ss 64 and 276 of the ACL), whether the term sits in fine print or is stated plainly.

Statements that misrepresent the customer's rights are a separate and more dangerous problem. Under s 29(1)(m) of the ACL, it is unlawful to make a false or misleading representation about the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy. The classic example is a "no refunds" sign or a "no refunds on sale items" policy. The ACCC is explicit that policies like these are illegal, because they suggest consumers have fewer rights than they actually have.

Other lines to avoid:

"The warranty is 12 months": an express warranty card does not cap the consumer guarantees. The acceptable quality guarantee includes durability for a reasonable period, which can outlast a fixed express warranty. Refusing a claim because the warranty expired is only defensible if the goods were in fact durable for a reasonable time given their price and nature.
"That is a manufacturer problem": the business that sold the goods remains responsible for resolving the customer's claim.
Non-compliant warranty documents: if you choose to give a warranty against defects, the document must comply with the prescribed requirements in the Competition and Consumer Regulations 2010 (Cth). It must be transparent and concise, state who provides the warranty, what it covers and how to claim, and include the prescribed statement that the goods come with guarantees that cannot be excluded under the ACL. A non-compliant document is itself a breach (s 102 of the ACL).

Change of mind is different. You do not have to refund a customer who simply changed their mind, and you can run a voluntary returns policy. But the policy must sit alongside the guarantees, not replace them.

Penalties and enforcement

Breaches of the consumer guarantees themselves are not penalty provisions. A customer's remedies are the refund, repair, replacement or compensation described above. The penalty exposure comes from the conduct around the guarantees, and it is substantial:

False or misleading representations (s 29 of the ACL): This includes "no refunds" signage and misrepresenting warranty rights. The maximum penalty for a corporation is the greatest of $100 million, three times the value of the benefit obtained, or 30% of adjusted turnover during the breach turnover period. For an individual the maximum is $2.5 million (s 224 of the ACL). The fixed $100 million limb doubled from $50 million when the Treasury Laws Amendment (Doubling Penalties for ACCC Enforcement) Act 2026 (Cth) commenced on 28 March 2026, a position Consumer Affairs Victoria summarises for business.
Unfair contract terms: Since November 2023, proposing an unfair term in a standard form consumer or small business contract, or applying or relying on one, is itself a contravention carrying the same penalty scale. The term is void even where no penalty is sought (s 23 of the ACL).
Warranty against defects documents: Giving a customer a non-compliant warranty document carries penalties capped at $50,000 for a body corporate and $10,000 for an individual, and it is also an offence (ss 102 and 192 of the ACL).
Misleading or deceptive conduct (s 18 of the ACL): a civil provision without pecuniary penalties, but it opens the door to damages, injunctions and corrective orders, and it is the provision most often paired with guarantee failures in litigation.

Enforcement sits with the ACCC and the state and territory fair trading regulators, which work together under the ACL. Beyond court penalties, they can issue infringement notices and substantiation notices, seek injunctions, publish public warning notices and accept court-enforceable undertakings. For a small business, even an investigation that ends in an undertaking is an expensive distraction.

A practical compliance checklist

Work through these items to close the most common gaps:

Train your team: cover the guarantees, the difference between major and minor failures, and the phrases to avoid. "No refunds" is not one of the phrases to use.
Publish a returns policy: separate change of mind rules from guarantee rights, and make sure signage, receipts and website FAQs say the same thing.
Check your terms: remove anything that excludes, restricts or modifies the guarantees, which is void under s 64, and look for potentially unfair terms in standard form contracts.
Substantiate marketing claims: any specific claim about performance, quality or timing must be capable of being proven, and absolute language such as "guaranteed" or "never" invites scrutiny.
Keep records: log claims, assessments and outcomes. Consistent records help you spot recurring defects and defend unreasonable claims.
Align with suppliers: agree who handles claims, who pays return freight on faulty items and how defective stock is credited, and make sure manufacturers reimburse you where the fault is theirs.
Use compliant warranty documents: if you give a warranty against defects, use a document that meets the prescribed requirements rather than an off-the-shelf card.
Set internal timeframes: assess claims and complete repairs within set periods, and review them against what is reasonable for your products and services.

Where a lawyer helps

A compliance review of consumer guarantee obligations is usually a small piece of work that pays for itself. A practitioner can:

review your standard terms and returns policy against ss 64 and 64A of the ACL, including whether separate consumer and business terms are worth having;
check your warranty against defects documents against the prescribed requirements, including the mandatory statement;
assess whether specific terms risk being unfair under the unfair contract terms regime, particularly one-sided termination rights, broad indemnities and excessive limitation of liability;
advise on a particular claim, including whether a failure is minor or major and what remedy the customer can insist on;
help you respond if a regulator contacts you, including substantiation notices or infringement notices.

The duty most often missed: durability after the warranty card expires

The compliance gap that costs Australian businesses most is not the obvious one. It is refusing a claim because the express warranty has expired, when the acceptable quality guarantee still applies because the goods should have lasted longer than they did. The question to train your team to ask is not whether the product is in warranty, but whether it was durable for a reasonable time given its price and nature. A $2,000 refrigerator that fails at 14 months, against a 12-month manufacturer warranty, is very likely still covered.

Start this week with the cheapest fix: walk your shop floor, website and receipts, and remove every "no refunds" style statement. Then decide how you will handle the first post-warranty claim that arrives. That habit removes most of the penalty risk, because the ACCC's enforcement focus is on businesses that mislead consumers about the rights the guarantees give them.