In April 2020, the National Consumer Credit Protection Act 2009 (NCCP) was amended by regulation to temporarily exempt certain loans from responsible lending obligations under the NCCP where particular conditions were met (the small business exemption).
The small business exemption was introduced as a temporary COVID relief measure in April 2020 to facilitate the flow of credit to small businesses and is due to expire on 2 April 2021. The small business exemption has now been extended until the earlier of 3 October 2024 and when the Federal Government’s new regime to amend the responsible lending regime commences.
The exemption applies to loans and principal increases provided to small businesses which are:
- genuinely for the purposes of a small business operated by the consumer (whether alone or with others); and
- those purposes are not merely minor or incidental in relation to the loan or principal increase.
Under the small business exemption, it will be sufficient for the lender to be satisfied that the credit is being provided at least partly for business purposes to be absolved from applying the strict responsible lending rules under the NCCP.
An entity is a small business for the purposes of the exemption if:
(a) it has fewer than 100 employees at that time; or
(b) either:
(i) its revenue for the previous financial year is $5,000,000 or less; or
(ii) if there was no time in the previous financial year when the business was carried on - its revenue for the current year is $5,000,000 or less.
