The non-compete bill now reaches into the sale contract. The clause to watch

In September I wrote that non-competes were going and that the restraint a seller gives a buyer was a different animal. That is still right. What has changed is that there is now a draft bill to read, and it goes further than the announcement did.

Treasury released the draft on 7 September 2026 and consultation closed on 2 October. It is not law. It has not been introduced to Parliament and it may change before it is. Read what follows as a list of things to watch, not things that have happened.

Four clauses, and what the draft does to each

Your restraint to the buyer. Outside the ban. The employment provisions are aimed at the employment relationship, and the draft explanatory material says restraints in a sale agreement are there to protect the goodwill being sold. A buyer can still pay for your promise not to set up across the road.

The staff clause between you and the buyer. This is the one to watch. The draft treats an agreement between businesses not to recruit, solicit or hire each other's staff as cartel conduct, which is the most serious category in competition law. It lists exemptions for joint ventures, secondments and labour hire. The firms that have published a reading of it found no equivalent exemption for a sale process. One national firm read the draft as switching off the existing goodwill exemption for these clauses, so that a promise not to recruit the sold business's employees after completion would be prohibited. Another noted that the draft has no express exemption for a sale process or for the confidentiality agreement signed before one.

Your own employment contract, if you stay on. Sellers commonly work in the business for a handover period. A non-compete written into that employment contract is an employment restraint, and if the salary is at or below $190,100 the draft bans it. The restraint that protects the buyer has to sit in the sale contract, which is the one place the draft leaves it alone.

Your staff's contracts. The non-compete ban covers employees at or below the threshold. The draft also bans clauses that stop a departing employee from recruiting their co-workers, at every income level, with no exemptions proposed.

Both sides of it

The Government's case. The Assistant Minister, Andrew Leigh, put it in a sentence: "Workers shouldn't need their old boss's permission to take a better job." The release cites e61 Institute research that one in five Australian workers is subject to a non-compete clause, and says a ban could lift the wages of affected workers by up to four per cent, about $2,500 a year for a typical worker.

The small business case. COSBOA supports removing unreasonable barriers to changing jobs. Its objection is that the draft goes past what was announced. Its chief executive, Skye Cappuccio, said: "A small business with ten employees can be seriously affected if a senior employee leaves and takes several staff with them." It has asked for the ban on co-worker clauses to be amended so a small business can still protect itself against a coordinated departure, for legitimate sale of business restraints to be protected in the Act itself and not left to explanatory material, for routine small business contracts to be kept clear of cartel exposure, and for a twelve month deferral of penalties for small business.

Both of those can be true together. A clause that holds a hairdresser out of work for a year is a different thing from a clause that stops a buyer's rival hiring the workshop the week after settlement. The draft deals with the first. It has not yet made room for the second.

Why it matters to a sale

A buyer of a small business is buying three things that walk: the customers, the owner and the staff.

The owner is handled by the vendor restraint, which the draft leaves in place. The customers are handled by contracts and by the restraint. The staff were handled, in part, by two clauses the draft takes aim at: the promise a competitor makes not to hire them, and the clause that stops a departing manager taking the team.

If those go, a buyer has less paper holding the workforce and will look harder at what else does. That is not a reason for alarm. It is the question a careful buyer was already asking, and the answer has always been in the business, not in a clause.

What to check now

• List the documents. Staff contracts, the confidentiality agreement you would ask a buyer to sign, any shareholders agreement, and the restraint in your last draft sale contract if you have one.
• Mark every clause about competing, soliciting customers and recruiting staff. They are three different promises and the draft treats them differently.
• Ask your solicitor which ones the draft reaches, and how the staff clause in a confidentiality agreement should be written while the law is unsettled.
• If you plan to stay on after a sale, raise the restraint early. It needs to be in the sale contract and paid for there.
• Work on what holds people without a clause. Pay that is at market, a role worth staying in, and a sale that staff hear about properly and at the right time.

The honest status

I am a broker, not a solicitor, and this is a draft. The firms whose readings I have relied on are saying the same thing I am: the text may change.

What will not change is the direction. Less of the value of a business will be held in place by clauses, and more of it by the business. An owner who starts from that assumption is prepared for the final wording, whichever way it lands.