An unfair contract term is a term in a standard form consumer or small business contract that causes a significant imbalance in the parties' rights, isn't reasonably necessary to protect the legitimate interests of the business relying on it, and would cause detriment if relied on. A court can declare it void. Since 9 November 2023, proposing or relying on one can also attract penalties.
Key takeaways
- A term is unfair only if all three parts of the test are met: significant imbalance, not reasonably necessary, and detriment.
- The regime covers standard form contracts with consumers and with small businesses (fewer than 100 employees or turnover under A$10 million).
- Since 9 November 2023, penalties apply to contracts made, renewed or varied from that date. Company penalties now reach A$100 million or more.
- Subscription clauses to check first: one-sided price and term changes, auto-renewal, supplier-only termination, exit fees and broad liability exclusions.
- The fix is usually balance: if you can change the deal, customers can leave without penalty.
In July 2024, Amazon started showing ads on Prime Video in Australia.
Until then, the service had been almost entirely ad-free. If members wanted it to stay that way, they now had to pay an extra A$2.99 a month. That included annual members, who had already paid A$79 upfront for a year of Prime.
How could Amazon change the deal halfway through a year people had already paid for?
According to the ACCC, through its contract. In June 2026 the regulator took Amazon to the Federal Court, alleging that Prime's terms between November 2023 and August 2025 contained five unfair terms that let Amazon make negative changes during the contract without giving subscribers a remedy. The ACCC says more than a million annual subscribers were affected. ACCC Chair Gina Cass-Gottlieb put it simply: "Consumers who wanted to avoid ads were left with no choice but to pay more."
The case was before the court when I checked in October 2026. (For the regulator's wider approach, see what the ACCC expects from subscription businesses.) But look at your own terms and ask: could we do that?
Most subscription businesses could. Their terms say something like "we may change these terms, our features or our prices at any time." That's exactly the kind of clause this guide is about.
What follows is general information as at October 2026, not legal advice. Unfair contract terms is an area where a lawyer's review of your actual terms is worth every dollar.
What is an unfair contract term?
Under the Australian Consumer Law, a term in a standard form contract is unfair if all three of these are true:
- It causes a significant imbalance in the parties' rights and obligations.
- It is not reasonably necessary to protect the legitimate interests of the party it benefits.
- It would cause financial or other detriment to the other party if it were relied on.
A court looks at the contract as a whole, not just the clause. It also considers transparency: is the term in reasonably plain language, legible, presented clearly and readily available? A fair-ish term buried in a wall of legalese is more likely to fail.
The ACCC's contracts guidance lists common types of terms that may be unfair, including terms that let one party (but not the other):
- avoid or limit their responsibilities under the contract;
- end the contract;
- penalize the other for breaching or ending the contract;
- change the terms of the contract.
business.gov.au adds terms that let only one party vary the price, decide on renewal, or decide whether the other party has breached the contract.
Read that list again with your subscription terms open. Most subscription agreements touch at least three of them.
When does the unfair contract terms regime apply?
It applies to standard form contracts with:
- Consumers: individuals buying wholly or mainly for personal, domestic or household use.
- Small businesses: where a party to the contract has fewer than 100 employees, or annual turnover under A$10 million.
Those small business thresholds have applied since 9 November 2023. Before that, the tests were 20 or fewer employees plus a contract value limit. The thresholds widened a lot, which brought most B2B subscriptions sold to SMEs inside the regime.
What's a standard form contract? One you prepared in advance that the customer can only accept or reject, like the terms behind your sign-up button. The law presumes a contract is standard form unless you prove otherwise. A contract can still be standard form even if customers can pick from options you set, or negotiate minor changes.
What changed on 9 November 2023?
Before November 2023, an unfair term was void, but there was no penalty for using it. Since 9 November 2023:
- proposing, using or relying on an unfair term in a standard form consumer or small business contract is prohibited, and penalties apply;
- this covers contracts made or renewed on or after that date, and terms varied or added on or after it (in which case the rules apply to the whole contract).
For subscriptions, that renewal point matters. A monthly or annual subscription that rolled over after November 2023 may well be covered by the penalty regime even if the customer first signed up years ago.
What are the penalties for unfair contract terms?
Since 28 March 2026, under the Doubling Penalties for ACCC Enforcement Act, the maximum penalty for a company breaching the ACL, including the unfair contract terms provisions, is the greatest of:
- A$100 million (doubled from A$50 million);
- three times the benefit reasonably attributable to the contravention; or
- if the benefit can't be worked out, 30% of adjusted turnover during the breach period.
Individuals face penalties of up to A$2.5 million. Courts can also order compensation, refunds and changes to contracts.
Fix your terms without breaking your numbers
A BPAG adviser can check how your pricing, exit fees, refunds and GST setup work together, then point you to the terms your lawyer should rewrite before you rely on them.
Which subscription terms are most likely to be unfair?
Here are the eight clauses I'd check first. The "safer version" column shows the direction to move in, not drafting to copy. Have a lawyer write the actual wording.
| Clause | Why it's risky | Safer direction |
|---|---|---|
| "We may change these terms at any time" | One-sided variation, often with no notice and no exit | Limited reasons for change, advance notice, and a right to cancel without penalty if the change is to the customer's detriment |
| "We may change our prices at any time" | One-sided price variation | Notice before the new price applies, new prices at renewal for prepaid plans, penalty-free exit |
| "We may change, add or remove features" | Lets you reduce what customers paid for, the core of the Amazon allegations | Commit to the core features of each plan for the term, and offer an exit or credit if you remove them |
| Auto-renewal on your terms only | Business.gov.au lists terms letting one party decide renewal as possibly unfair | Clear renewal terms at sign-up, reminders before renewal, easy cancellation |
| "We may terminate at any time; you may not" | Only one side can end the contract | Both sides can end on reasonable notice, or you can end only for good reason |
| Early termination fees | Penalizes only the customer for ending the contract | Proportionate fees, disclosed upfront, tied to genuine costs or discounts received |
| "We are not liable for anything" | Avoids your responsibilities, and may also mislead about consumer guarantees | Reasonable caps that don't exclude consumer guarantees or your own negligence |
| "Continued use means you accept the new terms" | Deems acceptance of changes customers may never have seen | Notify changes clearly, and give a real choice to accept or leave |
None of these clauses is automatically unfair. Context matters, and a clause that's balanced by other terms (such as a penalty-free exit) may be fine. But if your terms have several of them and no balancing rights for customers, you have a problem.
Are unfair contract terms enforceable?
No. If a court declares a term unfair, it is void. The rest of the contract continues if it can work without that term.
That has a practical sting for subscription businesses. If your price-increase clause is void, you may have to refund the extra you charged. If your exit fee clause is void, you can't collect it. Only a court can make the final call, but you don't want to find out the hard way.
What isn't covered?
The regime doesn't apply to:
- terms that set the upfront price you've disclosed;
- terms that define the main subject matter of the contract;
- terms required or expressly permitted by another law;
- company constitutions and certain shipping contracts.
Financial products and services, like loans and financial advice, are covered by equivalent rules that ASIC enforces.
So you can charge whatever upfront price you like (within other laws). The unfair contract terms rules are about what happens after the customer agrees: changes, renewals, exits, liability and fees.
How do unfair contract terms connect to the 2027 subscription rules?
They work side by side. From 1 July 2027 the new subscription rules require clear disclosure, ongoing notices and an easy exit, and a general ban on unfair trading practices applies to manipulative conduct toward consumers.
Two links matter most:
- A variation to an older subscription contract after 1 July 2027 can bring it under the new subscription rules. Changing your terms is a trigger, not just a tidy-up.
- The new rules cover how you sell and how you let people leave. Unfair contract terms cover what your contract lets you do. You need both right.
More in Australia's subscription trap laws and raising subscription prices in Australia.
My take
I've always thought the best subscription contracts are boring. They say what customers get, what it costs, how renewal works and how to leave, in plain English. If your business needs a clause that lets you change everything at any time, the real question is why. Usually the honest answer is that you're not sure your pricing works yet. Fix that, and the clause becomes unnecessary.
How to review your subscription terms in six steps
- Collect every version of your terms, plan descriptions and pricing page wording since November 2023, and note when each was used.
- Highlight every "we may" clause. Changes, suspension, termination, fees, data.
- Ask the balance question for each: if we can do this, what can the customer do in response?
- Check transparency. Could a customer find and understand this before signing up?
- Rewrite with a lawyer, starting with price, feature and term changes.
- Roll out the new terms properly, with notice and a choice, remembering that varying terms brings them under the rules. Then check how automatic renewals are presented.
The AU subscription compliance checklist includes a terms section you can work through with your lawyer.
What to do next
Run your sign-up and cancellation flow through the AU Subscription Compliance Checker, then start with the three clauses that caused the most trouble in recent cases: price changes, feature changes and auto-renewal. If you plan a price rise, model it first with the simulator so you know what a penalty-free exit could cost you.
Price Increase SimulatorModel the MRR impact of a price rise and your break-even churn.Open the free tool →Then look at the money side of your terms. Exit fees, refund rules and annual prepayments all affect cash flow and GST, and they're worth getting right together.
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Frequently asked questions
When does the unfair contract terms regime apply?
It applies to standard form contracts with consumers, and with small businesses where a party has fewer than 100 employees or turnover under A$10 million. The penalty regime applies to contracts made or renewed on or after 9 November 2023, and to terms varied or added on or after that date. Older contracts were already covered by the rule that unfair terms are void.
Who do unfair contract terms apply to?
They apply to any business that proposes or relies on terms in a standard form contract with a consumer or a small business. That includes online terms and conditions, click-wrap agreements and app store-style terms. Financial products and services are covered by equivalent rules enforced by ASIC. The regime doesn't apply to negotiated contracts, so genuinely negotiated enterprise deals are generally outside it.
Are unfair contract terms enforceable?
No. If a court declares a term unfair, it is void, meaning it never had effect. The rest of the contract keeps working if it can operate without that term. Until a court rules, the term technically stands, which is why the ACCC encourages businesses to remove unfair terms proactively rather than wait to be challenged.
Is my subscription price itself covered?
The term setting the upfront price is excluded, as is the term defining the main subject matter of the contract. So the unfair contract terms law won't stop you charging A$99 a month. But terms that let you change the price later, add fees, or vary what's included are not excluded, and those are often the terms that cause trouble.
How do I know if my contract is a standard form contract?
If you wrote it in advance and customers can only accept or reject it, it probably is. The law presumes a contract is standard form unless you prove otherwise. Courts look at bargaining power, whether you've used the same terms with many customers, and whether customers had a real chance to negotiate. Picking from options you set, or minor tweaks, doesn't change that.
Can I just add 'to the extent permitted by law' to my terms?
It helps with clarity in some places, but it doesn't fix an unfair term. A clause is judged by its effect and its fairness in the context of the whole contract. Courts also weigh transparency, so a vague catch-all can make terms harder to understand rather than fairer. Rewrite the risky clause itself.
General information only, current as at October 2026. It isn't legal, tax or financial advice and doesn't consider your circumstances. Speak to a qualified adviser before acting.
Talk it through with a BPAG adviser
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Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- ACCC, Contracts guidance for business (unfair contract terms)
- ACCC media release, Amazon in court for introducing ads to Prime Video using allegedly unfair contract terms (30 Jun 2026)
- business.gov.au, Australian Consumer Law and your business
- ACCC media release, ACCC welcomes new penalties and expansion of the unfair contract terms laws
- ACCC media release, ACCC takes action against Servcorp for alleged unfair contract terms (15 Sep 2017)
- Treasury Laws Amendment (Doubling Penalties for ACCC Enforcement) Act 2026 (No. 19, 2026)
- Competition and Consumer Amendment (Unfair Trading Practices) Act 2026 (No. 64, 2026)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.