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Your returns policy can help your customers feel safe and confident in their purchase. However, your returns policy must comply with Australian Consumer Law, otherwise you could risk infringement notices and penalties from the ACCC. In this article, we look at when customers are entitled to refunds, what consumer guarantees are, and how they affect your returns policy.

When do you have to refund a customer?

If your goods or services don’t meet a consumer guarantee, then the customer is entitled to a remedy. That might be a refund, a repair or replacement, or compensation. Who chooses the remedy depends on how serious the problem is: for minor problems you choose, and for major problems the customer chooses. We explain that split below.

If a customer simply changes their mind (so there is no fault in what you supplied), they are not automatically entitled to anything. However, if you publish a change-of-mind policy, you must follow it.

What are consumer guarantees?

Consumer guarantees are a set of promises the law attaches to everything you sell. They apply automatically, and you cannot refuse or limit them in your returns policy, so it is worth knowing exactly what you are promising.

Who counts as a consumer?

This part surprises people, because “consumer” is broader than it sounds. A customer is covered if any one of these applies:

• the goods or services cost less than $100,000 including GST
• they are of a kind ordinarily bought for personal, domestic or household use, whatever they cost
• the goods are a vehicle or trailer used mainly to transport goods on public roads

That means a business customer can be a “consumer” too. If you sell to other businesses, the guarantees usually still apply to you. There are exceptions: goods bought to resupply, or to be used up or transformed in production or manufacturing, or to repair other goods, are not covered.

If you provide goods

You guarantee to the customer that:

• you have a right to sell the goods
• the goods are of acceptable quality: safe, durable, free from defects, and they do what similar goods are commonly used for
• descriptions in your advertising are accurate
• the goods match any sample or demonstration model shown
• any express warranties you give are met
• the goods are fit for the purpose the customer told you about
• the customer will not be prevented from possessing or using the goods
• there are no hidden debts or charges over the goods
• spare parts and repair facilities are available for a reasonable time, unless you tell the customer otherwise at the time of sale

For example, if you sell clothing described as wool but the garment is synthetic, the customer is entitled to a remedy. You may also be at risk of misleading or deceptive conduct, which is a separate breach. Describing your products accurately matters twice over.

If you provide services

You guarantee that your services:

• are provided with due care and skill, at least as good as a competent provider with average skills would deliver
• are fit for the purpose the customer told you about
• are supplied within a reasonable time, if no time was agreed

For example, if you run a lawn mowing service and miss a large part of the garden, the customer is entitled to have it fixed at your cost, or to another remedy.

Major or minor problem: who chooses the remedy?

This is the part most returns policies get wrong. The seriousness of the problem decides who picks the fix.

A problem is major when the product is unsafe, is very different from its description or sample, has one serious problem or several smaller ones that would have stopped someone buying it, or cannot be used for its normal purpose and cannot easily be fixed in a reasonable time.

• Major problem with a product: the customer chooses between a refund or a replacement of the same type. You cannot insist on repairing it, and you cannot deduct an amount for the use they have had of it.
• Major problem with a service: the customer can cancel and get a refund (which may not be the full amount, since they pay a reasonable sum for work already done properly), or keep the contract at a reduced price.
• Minor problem: you must at least fix it or repair it free, within a reasonable time. You do not have to refund or replace, though you can choose to.

If you cannot or will not fix a minor problem in a reasonable time, the customer can have it fixed elsewhere at your cost, or ask for a refund or replacement instead.

Customers are not entitled to a remedy where they simply changed their mind, misused the product, or knew about the problem before buying it.

Can you put up a “no refunds” sign?

No. “No refunds”, “no refunds on sale items” and “exchange or credit note only” all misrepresent rights the customer cannot lose, and it is illegal to rely on a store policy or set of terms that denies those rights. This is not a technicality: misrepresenting consumer rights is a breach in its own right, separate from whatever went wrong with the product.

It is also why copying terms off the internet is risky. “All sales are final” is standard in American templates and unlawful here. For conduct on or after 28 March 2026, the maximum penalty for a company breaching these parts of the Australian Consumer Law is the greatest of $100 million, three times the benefit obtained, or 30% of adjusted turnover.

What should your returns policy say?

A good policy acknowledges the guarantees, sets out anything extra you offer voluntarily, and tells customers how the process works:

1. A plain statement that nothing in the policy limits the consumer guarantees.
2. What happens for faulty goods: how to contact you, what proof of purchase you need, and who pays return shipping.
3. Your change-of-mind policy, if you offer one, with its timeframe and conditions, clearly marked as a voluntary extra.
4. How refunds are paid and how long they take.
5. Any special categories: made-to-order items, perishables, digital products, or services already performed.

On returns costs: a customer does not have to return a product in its original packaging, though you can ask for proof of purchase. Customers return items that can be posted easily; you collect or pay for return of anything large, heavy or hard to remove. If the product does turn out to be faulty, you reimburse their reasonable return costs.

For online stores, your returns policy should match what your website terms and conditions say, and it should be readable before checkout. Our online shop and app packages include a returns policy written for what you actually sell.

What to do

The consumer guarantees cannot be avoided with a returns policy that counters or restricts them. For faulty products, for example, you cannot impose a deadline on returns or require the original packaging. Terms that try to restrict these rights are a breach in themselves.

What the guarantees require of you depends on what you sell, which is why writing a compliant returns policy is harder than it looks. For help with yours, contact us for a free, no-obligation chat.