Australia is moving to ban non-compete clauses for most employees, a significant change to how businesses have protected themselves after staff leave. The Federal Government has announced it will prohibit non-compete clauses for employees earning under the Fair Work Act high-income threshold. That threshold was $183,100 for 2025-26 and $190,100 for 2026-27 (indexed annually on 1 July), a level that covers the large majority of Australian workers. The reform is intended to commence from 2027, it will operate prospectively (existing clauses are not retrospectively voided under the announced design), and it does not touch restraints in the sale of a business. As at mid-2026, it has been announced and consulted on but the legislation has not yet passed, so the detail can still shift. This guide explains what is proposed, where it stands, how employers should prepare, and how protection strategy changes when non-competes leave the toolbox for most roles. It is general information only, not legal advice.
Published: July 2026
In the March 2025 Federal Budget settings, the Government announced its intention to ban non-compete clauses for workers earning below the high-income threshold, as part of a broader competition-policy agenda aimed at improving job mobility and wages. The core elements, as announced and consulted on:
For current contracting hygiene see types of employment contracts in Australia and Scale Suite HR services.
As at mid-2026, the position is: announced (March 2025), consulted on (a consultation paper issued in July 2025 with feedback closing in September 2025), but not yet legislated. The Government is expected to introduce legislation during 2026, with the ban intended to take effect from 2027, giving employers a lead time to adjust. The exact scope, including how it treats existing contracts, whether civil penalties apply for including banned clauses, what role the Fair Work Commission plays in disputes, and whether anything changes for high-income earners, will only be settled when the legislation passes.
The practical implication of this status is important: the direction is clear and employers should prepare, but the final detail is not fixed, so preparation should focus on the robust, no-regrets steps rather than on second-guessing provisions that may still change. Because the reform is not yet law and the detail is live, employers should track the legislation and take advice on their specific position as it firms up.
The rationale is worth understanding, because it shapes how the reform is likely to be applied. The Government’s argument is that non-compete clauses became a near-default inclusion in employment contracts, applied far beyond the senior, commercially-sensitive roles they were meant for, to café workers, hairdressers and junior staff, where they suppress wages and job mobility without protecting any real business interest. The view is that legitimate business interests (confidential information and intellectual property) are already protected by other tools (confidentiality obligations, IP law), so broad non-competes mostly restrict workers without corresponding benefit. Whether or not one accepts that framing, it explains the reform’s shape: it targets the over-use of non-competes on ordinary employees while leaving the properly justified protections (sale-of-business restraints, confidentiality, IP) intact.
A professional services firm has 18 employees. Remuneration:
Under a $190,100 high-income threshold, 17 of 18 employees would be covered by the ban. The non-compete the firm pastes into every contract protects almost nothing for those 17 once the ban is live (and is already often unenforceable if overbroad). The practical protection stack must shift to confidentiality, IP, and carefully drafted non-solicitation where still available, not a blanket non-compete.
Even though the reform is not yet law, the sensible preparation is clear, and much of it is good practice regardless.
Losing a business development manager who owns $1.2 million of client relationships can cost far more than a non-compete ever recovered in court. A retention package of $15,000 to $25,000 (bonus, progression, flexible work) plus tight confidentiality and non-solicit language often protects revenue better than an unenforceable two-year non-compete. Prepare for a world where mobility is freer and retention is the real competitive moat. Related workforce thinking sits in strategic workforce planning for Australian SMEs and employee retention bonuses Australia.
The non-compete ban is a genuine shift, but it is a manageable one for a business that prepares, and the preparation (robust confidentiality and IP clauses, considered use of non-solicitation, deliberate decisions about key employees, and a contract audit) is largely good contracting practice that a well-run business should be doing anyway. The connection to the finance and HR function is direct: it ties into employment-contract review, remuneration-structuring decisions about key people, and the broader task of keeping the business’s contracts current as workplace law changes. An embedded HR and finance function keeps contracts aligned with the shifting law and coordinates the remuneration and protection decisions, so a business is ready for the ban when it commences rather than scrambling after. Use the hire vs outsource calculator when key-person risk is also a capacity question. Because this reform is not yet law, the detail is still moving, and non-competes and restraints are legally technical, specific contracts and strategies should be reviewed with a qualified employment law professional.
Is there a non-compete ban in Australia?
The Government has announced and consulted on a ban on non-compete clauses for employees earning under the Fair Work Act high-income threshold, intended to take effect from 2027. As at mid-2026 it has been announced and consulted on but not yet legislated, so it is coming but not yet law.
Who will the non-compete ban apply to?
Employees earning below the high-income threshold (for example $183,100 in 2025-26 and $190,100 in 2026-27, indexed annually on 1 July), which is expected to cover roughly nine in ten employees, including many professional, technical and managerial roles, not just lower-paid workers. For those above the threshold, non-competes remain subject to the existing reasonableness test under the announced design.
When does the non-compete ban start?
It is intended to commence from 2027. Legislation is expected to be introduced during 2026, and the ban is intended to operate prospectively, applying to contracts made or varied after commencement rather than retrospectively voiding existing clauses, though the treatment of existing contracts was consulted on.
Does the ban affect sale-of-business restraints?
No. Restraints connected to the sale of a business, which protect the goodwill a buyer has paid for, are expressly excluded from the ban and remain available. The reform targets employment non-competes, not restraints outside the employment context.
What protections can employers still rely on?
Confidentiality and intellectual property clauses are unaffected by the ban and will do more of the protective work. Non-solicitation clauses (of clients and staff) remain available for now, though they were flagged for further consultation. Well-drafted, these cover much of what a non-compete was really aimed at.
How should employers prepare now?
Stop relying on non-competes for sub-threshold employees in new contracts, strengthen confidentiality and IP clauses, use non-solicitation clauses carefully, consider whether truly key employees should sit above the threshold, audit existing contracts to know your exposure, and track the legislation while taking advice as the detail firms up.
Are no-poach and wage-fixing agreements also being banned?
Yes, the Government signalled bans on “no-poach” agreements between businesses and anti-competitive wage-fixing arrangements alongside the non-compete ban, as part of the same competition-policy agenda. Further consultation was also flagged on non-solicitation clauses and non-competes for high-income earners.
Does a high salary automatically make a non-compete enforceable?
No. Even above the threshold, restraints still need to be reasonable in duration, geography and scope to protect a legitimate business interest. Overbroad clauses can fail under existing law.
Should I put non-competes in every contract until 2027?
That is a legal strategy question. Many employers are already moving away from default non-competes for ordinary roles because they are often unenforceable and will be banned for sub-threshold employees. Strengthen surviving protections now rather than stockpiling weak restraints.
Is this legal advice?
No. This is general information, and the reform is not yet law, with detail still moving. Non-competes and restraints are legally technical, so specific contracts, key-person protections and preparation strategies should be reviewed with a qualified employment law professional as the legislation firms up.
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We review and check this guide periodically. At the time of writing (July 2026), all information was current. Scale Suite is a registered BAS Agent, not a licensed tax advisor or financial advisor. This content is general information only and does not constitute professional tax, financial, or legal advice. Some details may change over time.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
Employment Hero Gold Partner, CA-qualified, and Xero Certified, we replace fragmented finance and HR processes with one responsive, senior-level function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
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