Bye bye, non-competes

What the 2025 budget changes mean for Aussie employers

The Albanese Government has just dropped a bombshell in the 2025 Budget: non-compete clauses will be banned for most Australian workers earning under $175,000.

If you’re an employer still relying on these clauses to keep your talent from walking, it’s time to get real and get ahead—because even though the change won’t kick in until 2027, the writing is on the wall:

Talent should be free to move.

A quick refresher: what are non-compete clauses?

Non-compete clauses are those restrictive contract terms that try to stop an employee from joining a competitor or starting a rival business after they leave your organisation. In theory, they protect IP, client lists, and trade secrets.

In reality? They’re often used to scare people into staying put—even in low-wage roles where the enforceability is legally shaky at best.

We’ve seen everything from hairdressers banned from cutting hair in their own suburb, to early childhood educators threatened with legal action for changing jobs down the road.

Spoiler alert: most of these clauses don’t hold up in court. But they still deter employees from jumping ship.

So, what’s actually changing?

Starting in 2027, non-compete clauses will be banned for workers earning less than the high-income threshold (currently $175k). That’s more than 3 million Australians—tradies, hospitality workers, hairdressers, childcare educators—who will no longer be contractually shackled to their employer.

The Government says it’s about wage growth, increased competition, and cutting the red tape.

Treasurer Jim Chalmers put it bluntly:

“Workers should not be handcuffed to their current job when there are better opportunities available for them.”

Why it matters – and what’s coming next

This is just the beginning. While the current ban targets lower-income earners, the Government has flagged broader consultation around:

• Non-solicitation clauses (clients, suppliers, and co-workers)
• Non-competes for high-income earners
• Penalties and transition arrangements

Legal experts say this aligns with the current state of play under common law—especially outside of NSW—where non-compete clauses are rarely enforceable below the high-income threshold anyway. But the formal ban removes grey areas and costly legal disputes.

Ryan Murphy from McInnes Wilson Lawyers calls it a “sensible” move, but warns employers to act now:

“The main battleground is going to shift to non-solicit clauses. Employers should ensure these are tightly drafted to protect real business interests—clients, IP, staff, and suppliers.”

Not everyone’s cheering

Some employer groups are less than impressed. The Recruitment, Consulting and Staffing Association (RCSA) argues this could hurt industries that invest heavily in training without formal qualifications.

Brooke Lord, RCSA’s Head of Advocacy, says:

“Restraint clauses are a form of assurance against training costs. Without them, businesses may reduce their investment in workforce development.”

And the Australian Chamber of Commerce and Industry (ACCI) called the move “heavy-handed,” pointing out that only 1% of employees turn down roles because of non-competes.

“This is regulatory overkill,” said ACCI CEO Andrew McKellar. “It undermines legitimate protections for businesses, particularly where staff hold sensitive commercial information.”

Fair point—especially for execs sitting on strategy decks, client pricing models, or product roadmaps. That’s why the Government is still considering whether to retain non-competes for high-income earners.

What smart employers should do now

Don’t wait until 2027. Get your house in order now.

Here’s what we recommend:

1. Shift focus to NDAs and non-solicits

Forget blanket bans on competition. Instead, use NDAs to protect confidential information and non-solicit clauses to stop employees poaching your clients, contractors, or team.

But make sure they’re watertight. Sloppy drafting = unenforceable and pointless.

2. Audit your employment contracts

Flag every contract that still includes non-competes. Replace them with enforceable protections, and start future-proofing your contract templates.

Don’t leave this to the last minute—it’ll be chaos in 2027 when the ban comes in.

3. Get better at offboarding

People will leave. That’s business. But a respectful, professional exit process (with clear expectations and legal coverage) protects your brand and reduces risk.

4. Fix the real retention issue

If the only reason your people stay is because of a contract clause? You’ve already lost them.

Instead of clinging to legal leashes, build:

• Better culture
• Stronger leadership
• Career development
• Flexibility
• Recognition

Do that, and they’ll want to stay. No clause required.

5. Stay across broader reform

The Government is also planning to ban wage-fixing and ‘no-poach’ agreements. That means:

• No more setting secret caps on what staff can earn across industries
• No more backroom deals to stop people getting hired by competitors

While structured pay systems are often built for fairness, employers will need to review how they’re communicated. Megan Kavanagh from Colin Biggers & Paisley makes a good point—some confidentiality is still essential when it comes to how salaries are calculated.

But the shift is clear: transparency is in, secrecy is out.

The Wrap Up

This isn’t just another compliance task. It’s a reset moment.

Non-compete clauses are on the way out—and frankly, if you’ve been relying on them to keep your team together, it’s time for a new strategy.

Get proactive. Update your contracts. Review your restraints. And build a culture that people choose to be part of.

Need help reviewing your contracts before the laws change?

👉 Reach out to the HR Gurus team today and let’s future-proof your business.