Refunds and Consumer Guarantees: What Small Businesses Must Do

If a product or service you sell doesn't meet the consumer guarantees in the Australian Consumer Law (ACL), you must fix it with a repair, replacement, refund or re-supply, and for a major failure the customer picks the remedy, not you. You never have to refund a change of mind, but you also can't post a "no refunds" sign, send customers to the manufacturer, or insist on store credit for a faulty item. Here's exactly what the law requires, where the line sits, and how to handle a refund request without a fight.

Who the guarantees cover

The consumer guarantees apply automatically to every sale to a "consumer", and the definition is broader than most business owners expect. A buyer is a consumer if:

the goods or services cost $100,000 or less (the threshold rose from $40,000 on 1 July 2021), or
they're of a kind ordinarily bought for personal, domestic or household use, whatever the price, or
they're a vehicle or trailer used mainly to transport goods on public roads.

That means other businesses are often consumers too. A tradie who buys a $3,000 laptop from you, or a cafe that hires you to install a coffee machine, gets the same guarantees as a household. The main carve-outs are goods bought to resell, or to use up or transform in manufacturing, production or repair. Private sales and traditional auctions are also outside most of the guarantees.

You can't contract out of the guarantees. A clause in your terms, a disclaimer at the checkout, or a signature on a docket doesn't remove them, so if you run an online store, make sure your returns page and checkout copy don't accidentally promise less than the law. Our guide on how to start an online store covers the rest of the compliance checklist.

The guarantees you make on every sale

You don't have to write these down anywhere. They're read into every sale by law.

Guarantee	What it means for you
Acceptable quality	Safe, durable, free from defects, acceptable in appearance, and does what that kind of product normally does — judged by what a reasonable customer would expect at that price
Fit for a disclosed purpose	If the customer told you what they needed it for and relied on your advice, it has to do that job
Matches the description	Whether spoken, on the label, on your website or in an ad
Matches a sample or demo model	The one they take home is as good as the one they saw
Express warranties honoured	Any extra promise you make ("lasts ten years", "weatherproof") becomes a guarantee
Spare parts and repairs	Manufacturers must make repair facilities and parts available for a reasonable time
Title and undisturbed possession	The customer owns it outright, with no hidden debts or security interests over it

For services, there are three guarantees: work done with due care and skill (at least as good as a competent provider in your trade), fit for the purpose the customer disclosed, and delivered within a reasonable time if no time was agreed. Architects and engineers are excluded from the fitness-for-purpose guarantee; everyone else is in.

Notice what isn't there: a time limit. Guarantees last for a "reasonable time" that scales with price and expected lifespan. Your 12-month warranty or 30-day returns window doesn't cap them.

Major or minor failure: who chooses the remedy

Everything hinges on this distinction, so get it right before you respond to a complaint.

A failure is major when the product or service:

has a problem that would have stopped a reasonable customer buying it had they known, or several smaller problems that add up to that,
is significantly different from the description, sample or demo,
is substantially unfit for its normal purpose (or the disclosed purpose) and can't easily be fixed within a reasonable time, or
is unsafe.

Anything less is a minor failure.

	Major failure	Minor failure
Who picks the remedy	The customer	You
Goods	Refund or replacement of the same type, at their choice; or they keep it and you compensate for the drop in value	Free repair, replacement or refund, within a reasonable time
Services	Cancel and refund the unused portion; or keep the contract and pay a reduced price	Fix the problem free within a reasonable time
If you don't act in a reasonable time	—	Customer can get it fixed elsewhere and bill you the reasonable cost, or reject the goods for a refund or replacement

On top of the remedy, customers can claim compensation for reasonably foreseeable loss caused by the failure, such as the cost of a plumber to clean up after a faulty washing machine floods the laundry.

When you don't have to give a refund

The guarantees protect against faults, not regret. You're not required to offer a remedy when the customer:

changed their mind, found it cheaper elsewhere, or doesn't like the colour,
caused the damage by misusing the product or ignoring instructions,
knew about the specific fault before buying (a clearly labelled "scratched display model", for instance),
asked for a service to be done a particular way against your advice, or gave you unclear instructions,
bought at a traditional auction or in a private sale.

You can offer change-of-mind returns as a customer service, and plenty of retailers do. Just understand that once you publish a policy, it's a promise you have to keep, and it sits on top of the legal guarantees rather than replacing them.

The "no refunds" sign is illegal, and so are these

Misrepresenting a customer's rights is a false or misleading representation under section 29 of the ACL, the same provision that carries the big penalties for misleading advertising. The ACCC has issued infringement notices and won court penalties over every one of the following:

"No refunds." A blanket statement, or "no refunds after 14 days", implies the customer has no rights when they do.
"No refunds on sale items." Sale and clearance stock carries exactly the same guarantees. Lululemon paid $32,400 in infringement notices for telling customers sale items couldn't be refunded or replaced.
"Exchange or store credit only." For a major failure the customer chooses a refund or replacement; credit is only acceptable if they agree to it.
Time limits on faulty goods. Jenny Craig paid $37,800 across three infringement notices, one of them for a membership agreement that required customers to report a fault within three days and return the product within 10 business days in its original packaging.
"Take it up with the manufacturer." You sold it, you're liable. Apple was ordered to pay $9 million after telling customers that third-party repairs voided their rights.
"You need the original packaging." You can ask for proof of purchase (a receipt, bank or card statement, or order confirmation), but not the box.

The sign you can display: "We don't offer refunds for change of mind. This doesn't affect your rights under the Australian Consumer Law."

Handling refund requests fairly also protects your reputation, because refused refunds are where a lot of one-star reviews come from. See our guide on managing customer reviews.

Warranties versus guarantees

Customers, and plenty of retail staff, mix these up. The consumer guarantees are the legal floor. A warranty is an extra promise a business chooses to make, and it can only add to the guarantees, never subtract from them.

A manufacturer's warranty (a "warranty against defects") promises what the maker will do if something goes wrong. When it expires, the consumer guarantees continue for as long as is reasonable. A 12-month warranty on a $4,000 TV doesn't mean the customer is out of luck at month 13.
Since 9 June 2019, any warranty against defects document must include mandatory wording stating that your goods or services come with guarantees that can't be excluded under the ACL, and setting out the customer's rights for major and other failures. There's one version for goods, one for services, and one for both. If you print your own warranty card, copy the text from the ACCC word for word.
An extended warranty is a paid add-on. You must not pressure customers into buying one or mislead them into paying for rights they already have for free. Fitbit was ordered to pay $11 million in penalties in December 2023, and Mazda $11.5 million in February 2024, for misleading customers about their consumer guarantee rights.

If you repair goods, one more obligation: before you accept a product that can store user data, or that you may fix with refurbished parts, you must give the customer a written repair notice warning of possible data loss and (using the ACCC's prescribed wording) that refurbished parts or goods may be used.

What this means for service businesses

Tradies, cleaners, consultants and salons are covered just as much as shops. If the paint peels because you skipped the primer, that's a failure of due care and skill; if the website you built can't take payments when the client said that was the whole point, that's a failure of fitness for purpose. For a major failure the client can cancel and get back what they paid for the unfinished or unusable part, or keep the work and pay less. For a minor failure you get the chance to fix it within a reasonable time.

Two protections worth building into your quotes and service contracts: confirm the customer's purpose and any instructions in writing, and note where you've advised against something they insisted on. That documentation is what separates "the customer told me to" from "the customer says I got it wrong".

How to handle a refund request

Ask what's wrong and when they bought it. Get the facts before you decide anything. Don't lead with your policy.
Confirm proof of purchase. A receipt, a card statement or an order email is enough. A good POS or e-commerce system makes this instant; our POS systems comparison covers which ones store customer receipts.
Assess the fault, not the customer. Was it misuse, or is it a genuine failure? If you need to inspect or send it to a technician, do it promptly. If a large item needs collecting, that's your cost, and if the fault is confirmed you reimburse any reasonable return costs the customer paid.
Classify it: major or minor. If it's major, offer the choice of refund or replacement (or a service cancellation). If it's minor, offer a repair, replacement or refund and give a realistic timeframe.
Refund the way they paid. Same card, same account, full amount, no deduction for use. Store credit only if they'd prefer it.
Claim it back. If the fault was a manufacturing defect, you're entitled to be reimbursed by the manufacturer or importer for the cost of the remedy. Keep the product, photos and a record of the customer's complaint to support the claim.
Write it down. Note the date, the fault, the remedy and who agreed to what. If the dispute escalates to your state fair trading office or a tribunal, the paper trail decides it.

What getting it wrong costs

Right now the ACL penalises misrepresenting consumer rights rather than the act of refusing a remedy, but the ACCC pursues those misrepresentations hard, and "improving industry compliance with consumer guarantees" is one of its published enforcement priorities for 2026–27.

Breach type	Maximum (as at September 2026)
Court penalty, company	Greater of $100 million, three times the benefit gained, or 30% of adjusted turnover during the breach period (conduct from 28 March 2026)
Court penalty, individual or sole trader	$2.5 million
ACCC infringement notice, company	$21,840 (60 penalty units); $218,400 for listed companies
ACCC infringement notice, individual	$4,368 (12 penalty units)

Infringement notice amounts are based on the Commonwealth penalty unit of $364 from 1 July 2026. Courts scale penalties to the business, so a corner store won't see eight figures, but a sole trader's penalty is personal and there's no company to hide behind.

The gap is closing, too. After a Treasury consultation in late 2024, Consumer Affairs Ministers agreed in November 2025 to add civil penalties for businesses that fail to give a customer a remedy when the law requires it, and for manufacturers that don't reimburse retailers. Treasury is drafting that legislation and it had not commenced as at September 2026, so check the ACCC's site before you rely on the current position. Once it does commence, an unjustified refusal becomes a fineable offence in its own right, not just a customer complaint.

Key takeaways

The consumer guarantees apply automatically to sales of $100,000 or less (and household-type goods at any price), including sales to other businesses, and no contract term can remove them.
For a major failure the customer chooses a refund or replacement; for a minor failure you choose, but the fix must be free and within a reasonable time.
You never have to refund a change of mind, but any change-of-mind policy you advertise must be honoured.
"No refunds", "no refunds on sale items", "store credit only" and "see the manufacturer" are all unlawful misrepresentations.
Refund in the original form of payment with no deduction for use; ask for proof of purchase, not the box.
Misrepresenting rights carries maximum penalties of $100 million for companies and $2.5 million for individuals, with infringement notices from $4,368 (as at September 2026).

Where to get help

ACCC — problem with a product or service you sold — plain-English business guidance on remedies, repair notices and the mandatory warranty wording.
ACCC — consumer rights and guarantees — the consumer-facing version, useful for seeing exactly what your customers are reading.
Your state or territory fair trading office (NSW Fair Trading, Consumer Affairs Victoria, Queensland Office of Fair Trading, Consumer Protection WA, and equivalents) — they handle most day-to-day disputes and offer free conciliation.
business.gov.au — fair trading — links to the ACL and to each state regulator.
Your lawyer — worth an hour to review your returns policy, warranty card and website terms before the ACCC or an unhappy customer does.
Your accountant — refunds and manufacturer reimbursements need correct GST treatment on your BAS, and a clear record of remedies given supports any indemnity claim.