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Small business definition to be expanded


The Australian Banking Association has agreed to expand the definition of small business in the Banking Code of Practice, as part of its response to an independent review.

The changes include lifting the threshold for total credit to $5 million, a move that means an extra 10,000 businesses will be covered by the Code of Practice.


The Code sets standards for banks to follow when dealing with individual and small business customers. It provides specific protections for small business including simplified loan documentation and limits on enforcement action.

“Australian banks are supporting small businesses all over the country”, said ABA CEO Anna Bligh.

“This change means thousands more businesses will receive the protections of the industry’s Code of Practice.”

The change will be made as part of the planned triennial review of the Banking Code of Practice scheduled for next year, with implementation in early 2023.

“A reasonable and careful implementation timeframe will ensure all banks, including smaller banks, can manage the transition during a time of economic uncertainty for many customers”, Ms Bligh said.

Background: a redefinition of ‘small business’

In 2019, after a major review of the Code, a new definition of small business was adopted, broadening the concept of small business status.

The new definition included businesses with up to 100 full time staff and $10 million turnover, where they had total credit outstanding of less than $3 million.

The Banking Code then became the first substantial industry code to be approved by ASIC.

A condition of ASIC’s approval was that the ABA commission an independent review of the small business definition within 18 months of taking effect.

Pottinger’s independent review is now complete

The Independent Pottinger Review of the definition of small business in the Code

A key question for the review was whether the total credit threshold in the definition should be increased to $5 million. To date the ABA has taken a position, based on available data, that $3 million is appropriate.

This view was based on the fact that at $3 million, more than 98% of businesses are covered by the Banking Code of Practice and the effect of implementing the new definition was yet to be gauged. Conducting the independent review during a period of economic upheaval has allowed for additional information to be gathered on the potential effect of a change to $5 million.

The Pottinger Review considered data collected by ASIC over the past 18 months and found that if banks were given sufficient time to prepare for such a change, any risk of adverse impact on competition or the availability of credit would be mitigated.

After considering the findings of the Review, the ABA will make the change together with any amendments to the Banking Code recommended as part of the Code review planned for next year.

The updated Code takes effect in early 2023.

The ABA’s response

The ABA’s response to the recommendations of The Pottinger Review