On 7 September 2026, the federal government released draft legislation that would ban non-compete clauses for most Australian employees — a reform Treasurer Jim Chalmers first flagged in the March 2025 Budget, and one that's now open for public consultation until 2 October 2026. If your employment contracts include a clause stopping staff from joining a competitor or starting a rival business after they leave, this is the point where "something might change eventually" turns into "here's what to actually check."
This article breaks down what the draft actually changes, why it matters even if you've never used a non-compete clause, what's settled versus still up for consultation, and what to check in your employment contracts before 2027.
Key Takeaways
- The government's draft legislation (released 7 September 2026, consultation open until 2 October 2026) would ban non-compete clauses for employees earning under the $190,100 Fair Work high-income threshold, targeting 2027.
- Only around 21% of Australian businesses currently use non-compete clauses, and large employers (1,000+ staff) are twice as likely to use them as small firms — but the reform still reshapes the labour market small businesses hire from.
- Businesses without non-compete clauses already pay comparable staff about 4% more on average, roughly $2,500 a year for a typical worker, according to Treasury and the e61 Institute.
- Confidentiality and IP clauses aren't part of this reform — they cover a separate 58% of the workforce and remain a legitimate way to protect client lists and trade secrets.
- The changes are prospective, so audit your contract templates now rather than rewriting every existing agreement this week.
What Australia's non-compete ban actually changes
A non-compete clause is a contract term that stops an employee from joining a rival or starting a competing business for a set period after they leave. Under the government's draft legislation, these clauses would be banned for most employees, applying prospectively once the law passes — meaning it would affect new contracts, not force businesses to tear up existing ones overnight.
The reform bundle is broader than non-competes alone. It also targets co-worker non-solicitation clauses (which stop former employees poaching your remaining staff), "cascading" restraints (where a ban on one role automatically triggers bans on related roles), and wage-fixing or no-poach agreements between employers — addressed through competition and cartel law rather than employment law.
Amanda Rishworth MP, Minister for Employment and Workplace Relations, put the rationale plainly: "Non-compete clauses drag down wages, handcuff workers, and put a handbrake on labour productivity." She added that "Labor is determined to help boost job mobility for the more than three million Australian workers constrained by a non-compete clause, including childcare workers, construction workers, and hairdressers."
Andrew Leigh MP, Assistant Minister for Productivity, Competition, Charities and Treasury, was more direct still: "Workers shouldn't need their old boss's permission to take a better job. Non-compete clauses can act like a padlock on opportunity, holding down wages and keeping people from jobs where their skills are worth more. We're cutting that padlock."
For small business owners, the landscape is shifting from a system where you could lock in talent for a period after they leave, to one where mobility is the norm. That's a genuine change in how you think about retention and your competitive advantage, not just a paperwork update.
Why this matters even if you've never used a non-compete clause
Even businesses that have never written a non-compete clause are affected, because the reform changes the mobility and pay dynamics of the entire labour market they hire from. If you assumed this reform is only for large corporations with dedicated HR teams, the data tells a more nuanced story.
According to research from the e61 Institute and the ABS Restraint Clauses Survey, cited by Treasury's own Competition Review, about 21% of Australian workers are subject to a non-compete clause, and roughly 21% of Australian businesses use them for at least some employees. Large businesses with 1,000+ employees are twice as likely (40%) to use non-compete clauses as smaller firms — most small businesses don't currently rely on them at all.
That doesn't mean the reform passes you by. When large employers can no longer lock in staff with non-competes, job mobility increases across the board, and that affects wage benchmarks everywhere. Treasury and e61 research shows businesses without non-compete clauses already pay comparable workers about 4% more on average — roughly $2,500 a year for a typical worker. If your competitors for talent sit in the large-employer category, expect their compensation and retention strategies to shift as this reform lands.
The same research also flags co-worker non-solicitation clauses (covering about 23% of workers) and client non-solicitation clauses (about 29%) as related but distinct restraint types. Even without a non-compete, you may have other restraints in your contracts worth reviewing as this reform plays out.
Where the reform actually stands right now
This is draft legislation open for public consultation — not a law yet, and not yet introduced to Parliament as a Bill. There's no immediate change to your legal obligations today, but the direction and timeline are clear enough to start planning around.
The timeline: the reform was announced in the March 2025 Federal Budget by Treasurer Jim Chalmers. A first round of Treasury consultation ran from 25 July to 5 September 2025 and drew 67 submissions. On 7 September 2026, the government released the actual exposure draft legislative text, with consultation on that text open until 2 October 2026. Target commencement is 2027, though no specific month has been confirmed.
The threshold that matters most for small business: the ban, as proposed, applies to employees earning under the Fair Work Act high-income threshold, currently $190,100 a year (a figure that's indexed and rises each 1 July). Employees above that threshold could still be asked to sign a non-compete under the current draft. And because the reform applies prospectively, existing contracts signed before the law takes effect are expected to be treated differently from new ones signed after — so there's no need to panic-rewrite every agreement on file this week.
What this does — and doesn't — cover
The reform targets clauses that stop someone taking a new job or starting a competing business — non-competes, co-worker non-solicitation, and cascading restraints — not every form of business protection. That distinction matters for how you should actually respond to it.
Confidentiality and trade-secret protections sit outside this reform entirely. According to e61 research, non-disclosure and confidentiality clauses cover an estimated 58% of the Australian workforce — a much larger and separate category from non-competes. These clauses stop employees sharing sensitive information, client lists, or proprietary processes, and nothing in the current draft touches them.
If your business relies mainly on confidentiality agreements and IP assignment clauses to protect client lists or trade secrets, you're not the primary target of this change. Protecting confidential information through an NDA is a different mechanism from restricting where a former employee can work, and the current draft leaves that distinction intact.
The reform bundle separately tackles wage-fixing and no-poach agreements between employers — arrangements where businesses agree not to hire each other's staff — through competition and cartel law rather than employment law. It's part of the same broader push toward labour mobility, but a different legal lever.
Pro tip
Pro tip: Don't wait for the final legislation to strengthen your confidentiality, IP assignment, and client-list protection clauses. These are the tools you'll lean on more heavily once non-competes are off the table for most employees, and they're not affected by this reform either way.
What to actually check in your employment contracts now
Even though the law isn't in force yet, there's no reason to wait until the last minute to get your contract library in order. Most small businesses have templates that were drafted years ago and never revisited — this is a natural trigger to audit them.
Start by pulling every current employment contract template you use. If you have different templates for different roles — sales, admin, management — gather them in one place and identify which ones contain non-compete, non-solicitation, or other restraint-of-trade language. You need a clear picture of what's actually in your library before you can plan any changes.
Next, check which employees earning near or under the $190,100 threshold currently have these clauses, since they're the ones most likely affected once the ban takes effect. Long-serving staff with older contracts don't need immediate action — the reform is prospective — but it's worth noting them for when the final law lands.
At the same time, review your confidentiality, IP assignment, and client-list protection clauses to make sure they're thorough and genuinely up to date, since these remain your main lever for protecting the business once non-competes are gone for most employees. Then start drafting updated new-hire templates now, so they're ready well before 2027 rather than assembled in a rush once the law passes.
If the reform's scope would meaningfully affect your industry — franchising, professional services, and trades with high staff turnover are worth a closer look — the consultation period closing 2 October 2026 is your window to submit feedback while the settings are still open.
Turning contract review into a one-off project, not an ongoing headache
Reviewing every employment contract in a business can sound like an endless task, but it doesn't have to be. Treated as a structured, one-off audit rather than a rolling worry, it's a project with a clear start and end point.
Most small businesses accumulate a genuine patchwork of agreements over time — a template from 2018, a revised version from 2020, a handful of custom contracts for senior staff. A full-portfolio review, rather than checking contracts one at a time as issues come up, is what actually catches the inconsistencies between them.
This is one of the more practical uses of AI-assisted contract review tools right now: scanning a full library of employment agreements and flagging which ones contain restraint-of-trade language, in a fraction of the time a manual line-by-line review takes. For a business running more than a handful of contract variations across roles or states, that's a meaningful head start on the audit, and it fits the same intelligent document processing approach we've covered for other compliance-heavy contract work.
Getting your own templates in order is manageable with a handful of contract variations. It's the broader question of how AI fits into HR and hiring processes generally — not just this one reform — that's exactly the kind of assessment we help clients work through at GrowthGear.
Where to start this week
Start by pulling every current employment contract template into one place, then work through the checklist below before the consultation period closes.
- Audit your contract library. List every current employment template and flag which ones contain non-compete, non-solicitation, or restraint-of-trade language.
- Identify affected employees. Cross-check staff earning near or under $190,100 against contracts containing these clauses.
- Strengthen what stays legal. Review confidentiality, IP assignment, and client-list protection clauses now, since these remain unaffected either way.
- Draft updated new-hire templates. Have compliant templates ready well before the targeted 2027 commencement.
- Submit consultation feedback if relevant. The window closes 2 October 2026 — after that, the policy settings are largely locked in.
| Action | Why it matters | Do this by |
|---|---|---|
| Audit all employment contract templates for restraint-of-trade language | You need to know exactly what's in your library before the law changes | This month |
| Flag employees earning near/under $190,100 with non-compete clauses | These are the contracts most likely affected once the ban takes effect | This month |
| Strengthen confidentiality, IP assignment, and client-list clauses | These stay legal and become your main protection once non-competes are gone | Before 2027 |
| Submit feedback on the exposure draft if it affects your industry | Consultation closes 2 October 2026 | Before 2 Oct 2026 |
| Update new-hire contract templates | Only new contracts signed after commencement are affected | Before 2027 |
This kind of change lands alongside a run of other 2026 workforce compliance shifts — see our coverage of wage theft compliance and how HR automation tools can keep contract and policy updates from becoming a recurring scramble. For a broader look at where AI fits into hiring, our AI recruitment tools guide and the AI Implementation Playbook cover the sequencing question in more depth, and our contractor workforce management coverage is worth a look if your business also engages contractors alongside direct employees.
FAQ
Frequently Asked Questions
It's draft federal legislation, released 7 September 2026, that would ban non-compete clauses for employees earning under the $190,100 Fair Work high-income threshold. It's open for consultation until 2 October 2026 and hasn't yet been introduced to Parliament.
Commencement is targeted for 2027, though no specific month has been confirmed. The ban would apply prospectively to new contracts signed after the law takes effect, not retroactively to existing agreements.
No. As proposed, it applies to employees earning under the Fair Work Act high-income threshold, currently $190,100 a year. Employees earning above that threshold could still be asked to sign a non-compete under the current draft.
No. Confidentiality and non-disclosure clauses are a separate category, covering an estimated 58% of the Australian workforce, and remain unaffected. They stay a legitimate way to protect client lists and trade secrets.
About 21% of Australian businesses use non-compete clauses for at least some employees, per e61 Institute and ABS Restraint Clauses Survey data. Large businesses with 1,000+ staff are twice as likely to use them as smaller firms.
Audit existing employment contract templates for restraint-of-trade language, flag affected employees near the $190,100 threshold, strengthen confidentiality and IP clauses, and draft updated new-hire templates ahead of the targeted 2027 commencement.
Sources & References
- Ministers, Treasury Portfolio — "Opening the door to better and higher paying jobs: banning unfair non-competes," including the $190,100 threshold and ministerial statements (2026)
- Treasury — Competition Review — Findings on non-compete clause prevalence and wage effects, citing e61 Institute and ABS Restraint Clauses Survey data (2023)
- e61 Institute — "The ties that bind: five facts on post-employment restraints in Australia," covering non-compete, non-solicitation, and confidentiality clause prevalence (2026)
- Treasury — Consultation c2025-681950 — First-round consultation on non-compete reform policy design, 25 July–5 September 2025 (2025)
