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Festive fall-out: know the rules on refunds and replacements

Christmas is a time of buying, giving and receiving gifts, but the goodwill can soon turn to despair if gifts are faulty or broken and customers seek to return them for repair, replacement or exchange.

To avoid confusion, familiarise yourself with Australian Consumer Law (ACL); display a refund policy to inform customers; and have a clear process in place to handle customers returning goods after Christmas.

Under ACL, if a gift is being returned simply because the customer has changed their mind or the gift-recipient doesn’t like the colour, refunding or exchanging the item is at your discretion. You may wish to put a time-limit on ‘change of mind’ returns, for example seven or 14 days, and you can choose to replace the item, refund their money or issue a credit note.

However, if the item is broken, unsafe or doesn’t do what it’s meant to do, you have an obligation to refund, repair or exchange it. The ACL has clear guidelines on guarantees, warranties and refund policies, so be sure you have the facts.

Here’s what you need to know:

  • Displaying a ‘no refund’ sign is against Australian Consumer Law. (Even saying ‘no refund on sale items’ is not allowed.)
  • If the product is not of acceptable quality and needs repairs, you can’t charge the customer to fix it, nor can you simply refer the customer to the manufacturer.
  • If the fault is major, you should offer to refund or replace the item, rather than repair it.
  • If the item is bulky, you should pay for its transportation.
  • If you’re repairing or replacing the item, you must tell the customer if a replacement is second-hand or refurbished with used parts.
  • Repairs must be completed within a reasonable time.
  • Items don’t have to be returned in the original packaging and if the customer has lost the receipt, you can still accept proof of purchase by a credit card statement, confirmation or receipt number from an internet or phone transaction.

For more information, see the Australian Competition and Consumer Commission’s Warranties and refunds – a guide for consumers and business.