New subscription contract law targets subscription traps
Updated: Jul 17
On 2 July 2026 the Competition and Consumer Amendment (Unfair Trading Practices) Act 2026 (Cth) (UTP Act) was passed, amending the Competition and Consumer Act 2010 (Cth) and the Australian Consumer Law. The reform introduces a broad prohibition against unfair trading practices, business conduct that manipulates or distorts consumer decisions and new supplier obligations relating to subscription contracts. In this update we focus on the new subscription contract obligations which are designed to protect small businesses and consumers from so-called 'subscription traps’. We will cover the other aspects of the reform in a later update.
The law requires businesses to provide customers with:
clear and upfront disclosure of key subscription terms;
reminder notices before renewals, trial expiries or price increases; and
simple and accessible cancellation processes.
The UTP Act commences on 1 July 2027, a lead time intended to give businesses offering subscription contracts time to comply with the new obligations which may require significant operational change for some businesses.
What is a subscription contract?
A contract is a subscription contract under the UTP Act if it falls into one of the following categories:
Indefinite period: The contract provides for recurring or continuing supply of goods/services for an indefinite period (e.g. SaaS arrangements on a rolling monthly basis).
Fixed period with automatic renewal: The contract provides for the supply of goods/services for a fixed period that continues after the period ends unless a party stops it (e.g. a 12-month software licence that automatically renews).
Initial free period: The contract provides for an initial free period after which the subscriber automatically incurs liability to pay for the goods/services (e.g. a 30-day free trial that converts to a paid subscription).
Initial discount period: The contract provides for the supply of goods/services at during an initial period at one rate followed automatically by a higher rate (e.g. introductory offers where the first three months are $5/month and then the price increases to $20/month).
A contract for any of the following is exempt from the UTP Act: lease, licence of real property, hire-purchase, payment by instalments, childcare and school tuition. Importantly, a contract that simply ends at the conclusion of a fixed period or requires positive steps to be taken for the contract to continue (such as an option to renew), is not a subscription contract.
Why subscription traps are being targeted
Subscription contracts are prevalent for digital services such as streaming and software-as-a-service products (among others). A common feature of such contracts is a provision enabling the supplier to continue charging unless the customer takes affirmative action to cancel. A subscription trap arises where subscription pricing is structured so that the initial cost is emphasised and the long-term cost is obscured through automatic renewals, price step-ups or friction in the cancellation process. Consultation on the reforms identified recurring harms including:
Customers not being given material information at the point of sale to make an informed decision about a subscription.
Cancellation processes that are difficult to navigate or are overly complex.
Free trials or promotional periods that roll over to paid subscriptions without the customer's awareness.
In the 2023 Australian Consumer Survey, 25% of respondents reported difficulty cancelling subscriptions and the Consumer Policy Research Centre found in 2024 that 75% of Australians with subscriptions have had a negative experience when trying to cancel.
Obligation 1 - Upfront disclosure at the point of offer
When offering to supply goods or services under a subscription contract, a supplier must disclose the following information when making the offer:
a statement that the contract, if entered into, would be a subscription contract;
any liabilities the subscriber would or may incur under the contract (including the price and any fees and charges);
the period of the contract;
details of any renewal, extension or continuation of the contract;
any notice required to end the contract; and
how the contract can be ended.
For written or online sign-ups, the disclosure must be legible, prominent, unambiguous and in close proximity to where the contract is available to be entered into by a customer. Information must not be hidden in fine print or obscured. For example, for online contracts, disclosure should appear on the same page on which the contract can be entered (such as close to the "Subscribe" or "Purchase" button). A mere link to terms and conditions is unlikely to be sufficient.
Obligation 2 - Reminder notices during the subscription
The UTP Act establishes a framework for ongoing notification obligations for suppliers while the contract is in effect. The details of what information must be given, when and how will be set out in regulations that are yet to be published. The ACCC understands from Treasury consultation that the regulations may require suppliers to disclose the following information:
the fact of an automatic subscription renewal or automatic conversion of a free trial into a paid subscription;
the cost of the subscription; and
how the contract can be ended before the automatic renewal or conversion occurs.
Suppliers should assume they will need to notify subscribers before a trial converts to a paid subscription and before a subscription auto-renews. The notification must be sent with sufficient lead time for the subscriber to cancel before the charge is incurred. The timing and content of these reminders will be critical. A reminder sent the day before renewal does not give the subscriber sufficient time to cancel, while a reminder sent six months before renewal may be too early to be useful.
Obligation 3 - Cancelling must be easy
Suppliers must provide a way for subscribers to end the contract. They must ensure that it is easy to find, straightforward and requires only the steps reasonably necessary to end the contract and protect the subscriber's interests. Steps that protect the subscriber’s interests that are permitted may include two-factor authentication or factual explanations of the consequences of cancelling (e.g. loss of the subscriber’s stored data). Practices that unreasonably hinder the subscriber ending the contract will not comply (e.g. a requirement to provide extensive feedback before cancelling).
Additionally, if the subscriber entered the contract online, or the supplier provides an online way of entering a subscription contract for the same kind of goods or services, one of the ways to end the contract must be online. Retention offers such as a pause, discount or alternative plan may be permissible if presented once and briefly, but not if they are used to create a multi-step gauntlet that a subscriber must navigate before cancellation is effective.
Protections apply to consumers and small businesses
The above obligations apply to subscription contracts that meet either the ‘consumer requirement’ or the ‘small business requirement’. The consumer requirement is met where an individual acquires the goods or services wholly or predominantly for personal, domestic or household use or consumption. The small business requirement is met where a standard form contract is made with a subscriber that employs fewer than 100 people or has a turnover of less than $10 million in the last income year.
Application to existing contracts
The above obligations apply to new subscription contracts entered into on or after 1 July 2027. However, Obligation 2 and Obligation 3 (above) will apply to existing contracts that are renewed, extended or otherwise continued, or varied, on or after 1 July 2027.
Foreign companies with Australian customers
Companies located overseas entering subscription contracts with Australian consumers and small businesses will be subject to the new law.
Penalties and enforcement
The maximum penalty for corporations that contravene the UTP Act is the greater of $100 million, three times the value of the benefit obtained, or 30% of the supplier’s adjusted turnover during the breach period. The maximum penalty for individuals is $2.5 million. SaaS providers and streaming services (among others) will likely be in the ACCC’s enforcement spotlight.
Practical takeaways
To prepare for the 1 July 2027 commencement date of the UTP Act, businesses offering subscription contracts should consider taking the following steps:
Review the sign-up process: Ensure the required disclosures are presented to customers in a compliant manner before the contract is entered into.
Build ongoing notification capability: Design subscription management systems to send compliant reminders to subscribers before trials convert and renewals occur.
Implement cancellation process: Ensure subscription cancellation is easy to find and straightforward. Cancellation must be made as easy as sign-up.
Review existing contracts: Assess which existing subscription contracts will be renewed, extended or otherwise continued, or varied, on or after 1 July 2027 to ensure compliant practices are implemented for these contracts.
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Legal Notice
The contents of this article are for information purposes only and may not be current as at the date of accessing this article. The contents of this article do not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be sought separately before taking any action based on this article.
