Based in Sydney, Raja is a law student enrolled in a Bachelor of Laws and Bachelor of Communications (Writing and Publishing) at the University of Technology Sydney. He is passionate about transferring knowledge in relation to businesses, legal advice and marketing direction. Raja has experience working in immigration law and is driven by the writing, editing and publishing process of content.
Introduction
A well-crafted returns and refund policy isn’t just good customer service, t’s a legal requirement under Australian Consumer Law. Whether you’re running an online store, a brick-and-mortar shop, or both, understanding how to create a compliant policy protects your business from disputes while building customer confidence. This guide walks you through the essential elements of writing a returns and refund policy that meets ACL standards and serves your customers fairly.
Table of Contents
Why Returns & Refund Policies Matter for Your Business
Your returns and refund policy serves as the foundation of trust between you and your customers. When shoppers understand their rights and your processes upfront, they’re more likely to complete purchases and return as loyal customers.
A clear policy reduces disputes by setting expectations from the start. Customers know exactly what to expect if something goes wrong with their purchase, and your staff have a documented process to follow when handling returns. This consistency prevents misunderstandings and minimises the time spent resolving complaints.
Beyond customer relations, compliance with Australian Consumer Law is non-negotiable. Businesses that fail to honour consumer guarantees face penalties from the ACCC, including fines up to $50 million for corporations. Your policy demonstrates compliance and provides evidence that you’ve communicated consumer rights to your customers. Even if you operate primarily online, ACL applies to all Australian businesses regardless of size or sales channel.
Understanding Australian Consumer Law (ACL)
Australian Consumer Law establishes a national framework for consumer rights that applies uniformly across all states and territories. The ACL forms part of the Competition and Consumer Act 2010 and includes automatic guarantees that cannot be excluded, restricted, or modified by any business policy.
Under ACL, consumers have statutory rights regardless of what your returns policy states. These consumer guarantees cover goods and services and include guarantees that products are of acceptable quality, fit for purpose, match their description, and are delivered within a reasonable time. Services must be provided with due care and skill, be fit for any specified purpose, and be delivered within a reasonable time unless otherwise agreed.
When these guarantees aren’t met, consumers are entitled to remedies. For major failures, customers can reject goods and receive a refund or replacement. For minor problems, you must repair or replace the item within a reasonable timeframe. Understanding these baseline rights is crucial because your policy must work within this framework, not against it.
Legal Requirements for Return & Refund Policies
Your returns and refund policy must acknowledge and uphold ACL consumer guarantees. At minimum, the policy needs to clearly state that customers are entitled to refunds, repairs, or replacements when products have major problems or fail to meet consumer guarantees.
You must specify what constitutes acceptable and unacceptable reasons for returns under ACL. Major problems include goods that are significantly different from the description or sample, are substantially unfit for their common purpose and cannot be easily remedied, are unsafe, or are so defective that customers would not have purchased them if they’d known. Minor problems that can be repaired within a reasonable time also require action from your business.
Your policy should outline the process for customers to claim their rights, including timeframes for reporting issues, required documentation like proof of purchase, and how remedies will be provided. You must also clarify what’s excluded from your policy. Change of mind returns are at your discretion and don’t fall under ACL, so you can set your own rules or decline them entirely. However, you need to communicate this distinction clearly so customers understand when their statutory rights apply versus when they’re relying on your goodwill.
Include information about who bears the cost of returns. Under ACL, if goods fail to meet guarantees, you cannot charge customers for return shipping or restocking fees. You might require customers to cover these costs for voluntary returns like change of mind, but this must be stated upfront.
How to Draft a Returns & Refund Policy
Start by creating a clear structure that separates ACL rights from your additional goodwill policies. This prevents confusion and ensures customers can quickly find information about their statutory entitlements.
Begin with a statement acknowledging consumer guarantees under Australian Consumer Law. Use plain language to explain that nothing in your policy limits or removes these rights. This opening section should cover what constitutes a major failure and what remedies customers can expect.
Next, detail your process for handling ACL-protected returns. Specify how customers should contact you, what information they need to provide, and your expected response timeframe. Include details about repair or replacement procedures if relevant to your business. Many retailers promise assessment within two to three business days and resolution within seven to fourteen days for straightforward claims.
If you offer voluntary returns for change of mind, create a separate section with its own rules. State the timeframe clearly, such as 30 days from purchase. Outline the condition requirements for returned items, whether you offer refunds or store credit only, and who pays for return shipping. Make it obvious that these voluntary returns are separate from ACL rights.
Include a section on exceptions and exclusions. List products that cannot be returned for health or safety reasons, such as intimate apparel, custom-made items, or perishable goods. Clarify that ACL rights still apply to these items if they’re faulty or don’t match their description.
Add practical information about the return process, including whether customers need a returns authorisation number, where to send items, how refunds will be processed, and expected timeframes for receiving refunds or replacements. Specify whether refunds go back to the original payment method or if alternatives are available.
Common pitfalls to avoid include using ovague language about when refunds are available, setting unreasonably short timeframes for claiming ACL rights, charging fees for returns covered by consumer guarantees, requiring customers to deal directly with manufacturers for warranty claims within the initial period, or hiding the policy in hard-to-find locations on your website.
Examples of Clear Return & Refund Policies
A compliant policy for a clothing retailer might read: “Under Australian Consumer Law, you have guaranteed rights for products that have major problems or don’t match their description. If your item is faulty or doesn’t meet consumer guarantees, contact us within a reasonable time for a repair, replacement, or refund. We also offer voluntary returns within 30 days of purchase for change of mind. Items must be unworn with tags attached. You’ll receive store credit, and you’re responsible for return shipping costs.”
For a technology business, an effective policy could state: “Our products come with guarantees that cannot be excluded under Australian Consumer Law. If your device has a major failure, you’re entitled to a replacement or refund. For minor problems, we’ll repair the item within a reasonable time at no cost to you. To make a claim, email us at [email protected] with your proof of purchase and description of the issue. We’ll respond within two business days with next steps. This is in addition to any manufacturer warranty provided with your product.”
Both examples clearly separate statutory rights from voluntary policies, use accessible language, provide concrete contact information and timeframes, and avoid restricting consumer guarantees.
Common Mistakes to Avoid
Many businesses inadvertently create non-compliant policies by including prohibited terms. Never state that all sales are final, that you only offer store credit for faulty goods when a refund is required under ACL, that repairs are your only remedy option, or that customers must pursue warranty claims through manufacturers.
Another frequent error is conflating change of mind returns with ACL rights. Keep these conceptually and physically separate in your policy document. Customers exercising their statutory rights shouldn’t have to meet the same conditions as those making voluntary returns.
Failing to update policies when ACL provisions change creates compliance risks. Review your returns policy annually and whenever significant consumer law updates occur. The ACCC website provides current guidance on obligations.
Some businesses try to limit their liability by requiring returns within very short periods like seven days. While you can set reasonable timeframes for reporting problems, these cannot override ACL, which allows customers to claim remedies within a reasonable time based on the nature of the product and failure.
Keeping Your Policy Visible and Accessible
Your returns and refund policy serves no purpose if customers cannot find it. Display the policy prominently in multiple locations across your customer journey.
On your website, link to the policy from your footer on every page, include it on product pages near the add-to-cart button, display key points during checkout before purchase completion, and send a copy with order confirmation emails. For physical stores, display summaries at point of sale, include policy information on receipts, and provide full copies upon request.
Make the policy easy to read by using short paragraphs, bullet points for key information, headings that allow customers to jump to relevant sections, and plain English without legal jargon. Consider providing a short summary of key points at the top of the document for customers who want quick answers.
For businesses with multilingual customer bases, consider translating your policy into commonly spoken languages in your market. This demonstrates accessibility and reduces the likelihood of misunderstandings.
Ensure all staff understand the policy and can explain it to customers. Regular training prevents situations where employees inadvertently contradict your written terms or deny legitimate claims.
FAQs
How do I write a return and refund policy?
Start by acknowledging ACL consumer guarantees in clear language. Outline your process for handling faulty goods including contact methods, assessment timeframes, and remedy options. If you offer voluntary returns, create a separate section with your own rules about timeframes, conditions, and costs. Include exceptions like perishable goods, but clarify that ACL rights still apply to faulty items. Make the policy accessible on your website and at your physical location. Review the ACCC’s guidance for businesses and consider using a template that includes all required elements.
What is the Australian law regarding refunds?
Australian Consumer Law requires businesses to provide remedies when products fail to meet consumer guarantees. For major failures, customers can choose a refund or replacement. Major failures include goods that are significantly different from the description, substantially unfit for purpose without an easy fix, unsafe, or so faulty that a consumer wouldn’t have bought them knowing of the problem. For minor failures, businesses must repair or replace the item within a reasonable time. These rights apply automatically regardless of any store policy. Refunds are not required for change of mind purchases unless you’ve promised this as part of your store policy.
What are the legal requirements for return policies?
Your return policy must not exclude, restrict, or modify ACL consumer guarantees. It should clearly state that customers have rights to remedies for faulty goods or those that don’t meet guarantees. The policy must explain how customers can make claims, provide reasonable timeframes for assessment, and outline available remedies. You cannot charge fees for returns covered by ACL, require customers to deal with manufacturers for initial faults, or impose conditions that make it unreasonably difficult to exercise statutory rights. You can set your own rules for voluntary returns like change of mind, but these must be communicated separately and clearly. The policy should be easily accessible to customers before and after purchase.
Download our free returns & refund policy template compliant with ACL. Get started with a professionally drafted template that includes all required elements under Australian Consumer Law, ready to customise for your business.
