The Government’s introduction of legislation to extend unfair contract terms (UCT) protections for small business has been welcomed by the Institute of Public Accountants (IPA).

“The IPA has long advocated for a fairer deal for small business when it comes to contracts and has voiced its concerns through the extensive consultation period with Treasury,” said IPA chief executive officer, Andrew Conway.

Under the new protections, a court will be able to strike out a term of a small business contract that it considers unfair.  Under these protections, a contract will be a small business contract if at least one party has fewer than 20 employees and its value is below the prescribed threshold of $100,000 (or $250,000 for a multi-year contract).

“While we would have preferred a higher ‘upfront price’, we believe the new protections will help small business in dealing with unconscionable conduct.

“The IPA is of the opinion that the $100,000 threshold is insufficient as it significantly restricts the availability of the UCT provisions to small business and may lead to unjustifiable distinctions being drawn between consumer and business contracts.  The “take it or leave it” rationale for reform can apply just as much to contracts over $100,000 as to those for less than this amount.

“The monetary limit is of particular concern to small businesses that make only a few large contracts each year rather than numerous smaller ones. For example, an agricultural producer selling an annual crop may have a series of contracts each with a value over $100,000.

“The existence of the monetary limit will also make it possible for a dominant firm to avoid the UCT provisions by aggregating the contracts it makes with a particular small business so they exceed that limit.

“However, there is no doubt that the Government has taken a positive step forward in support of small businesses across Australia; the IPA applauds the legislation and looks forward to its passage and implementation.

“We will work with our members and small business to raise awareness of the benefits of this important legislation,” said Mr Conway.