Federal Budget 2025: Government pledges to ban non-compete clauses for middle and low income workers

Non-compete clauses could be a thing of the past for many Australians with the Federal Government stating its intention to ban them for workers earning less than $175,000 in Tuesday’s Budget.

Revealed in Tuesday night’s Budget, the commitment to ban non-compete clauses for those below the high-income bracket was one of a handful of of ideas to boost competition.

According to Productivity Commission modelling presented in the Budget, the non-compete reforms could add $5 billion to GDP annually.

Figures in the Budget also suggest the reforms could lift the wage of the median affected worker by up to four per cent or about $2500 per year.

During his Budget night speech Treasurer Jim Chalmers said reforming non-compete clauses would give more power to workers.

“We will abolish non-compete clauses for most workers,” he said.

“Non-competes are holding too many Australians back from switching to better, higher-paying jobs.

“More than three million Australians are captured by these clauses, including childcare workers, construction workers and hairdressers.

“People shouldn’t need to hire a lawyer to take the next step in their career.

“Or (get) permission from their old boss if they want to be their own boss, and turn an idea into a small business.”

The change would need to go through consultation and be passed as legislation.

It is then expected to take effect from 2027, following consultation.

While the current proposal is capped to those earning below $175,000 the Government says it will consult further on non-compete clauses for high-income workers.

Banning non-compete clauses was not only the only measure proposed to increase competition.

The Government will also aim to close loopholes allowing “anti-competitive” arrangements which cap workers’ pay and conditions without their knowledge as well as blocking workers being hired by competitors.