Australian authorities have published new guidance on what happens to consumer purchases, gift cards and deposits when a retail store shuts its doors or becomes insolvent.
The advice, issued by Western Australia’s consumer protection agency, explains how customer rights and creditor claims are treated under insolvency rules and consumer law.
What happens to purchases and gift cards
When a retail business closes or enters financial difficulty, outcomes for customers vary depending on whether it continues trading or is wound up.
If a retailer goes into voluntary administration but continues trading, customers who have paid in full and can show proof of purchase may still receive their goods or services.
Those who have only paid a deposit could be asked to pay the balance before receiving their item.
Gift cards and credit notes may also be affected during insolvency. Administrators can impose conditions on their use, such as requiring customers to spend additional money in the same transaction in order to redeem a stored value.
If the business is sold during the insolvency process, new owners decide whether to honour outstanding gift cards or credit notes.
If a retailer is not saved and ceases trading entirely, customers risk losing the money they have paid for goods or services they have not received, including deposits and unspent gift cards.
Order of creditor claims and refund options
Under Australian insolvency law, the order in which claims are paid is determined by the Corporations Act and related regulations.
Secured creditors, such as banks and major suppliers, are paid first from any available assets. Employee entitlements are often prioritised next.
Unsecured creditors, a category that typically includes individual consumers owed money, are last in line and may receive only a partial repayment or none at all.
Customers can register their details with the appointed administrator or liquidator as unsecured creditors, but this does not guarantee recovery of funds.
In some cases, people who paid by credit card or debit card may be able to contact their card provider about a chargeback, which effectively reverses the payment if claimed within the provider’s time limits.
Consumer guarantees and manufacturer obligations
Consumer rights under the Australian Consumer Law (ACL) may still be available even if the retailer has closed, particularly where the product manufacturer is a different entity.
The ACL is a national framework that sets out basic consumer guarantees for goods and services in Australia. These guarantees cover quality, fitness for purpose and other standards that businesses must meet when selling to consumers in the country.
If the manufacturer or another entity covered by the ACL is separate from the insolvent retailer, customers may contact that entity to seek remedies for faulty goods or services.
If a retailer continues to trade under administration, it may be able to meet its consumer guarantee obligations during that period. However, if the business has been sold, the new owners decide whether to address previous claims.
For more information on insolvency processes or to identify the administrator or liquidator handling a closed business, consumers and businesses can consult the Australian Securities and Investments Commission’s published insolvency notices.
