Fixed-term contract limits restrict both the maximum period of a fixed-term contract and the use of consecutive contracts for the same role, with anti-avoidance provisions and defined exceptions. Confirm current periods, exceptions and requirements against Fair Work Ombudsman guidance.
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The 2023 Changes and 2026 Implications
From 6 December 2023, the Fair Work Act 2009 (Cth) introduced significant restrictions on the use of fixed-term employment contracts. The changes limit fixed-term contracts to a maximum period of two years (including renewals and extensions), restrict the ability to re-engage the same employee on consecutive fixed-term contracts for the same role, and include anti-avoidance provisions to prevent employers from structuring arrangements to circumvent the limits. Understanding the current rules is essential for Australian employers in 2026.
Key Takeaways
Fixed-Term Contract Limits: The Maximum Period
A fixed-term contract cannot be for a period exceeding two years, including any extensions or renewals. A contract that is expressed to run for three years, or that is renewed beyond the two-year cumulative threshold, contravenes the fixed-term contract rules unless an exception applies.
The two-year limit applies cumulatively across a series of contracts with the same employee for the same or substantially similar role. An employer cannot use a series of successive 12-month contracts to achieve a longer-term arrangement that would otherwise fall within the limitation.
The Consecutive Contract Restriction
An employer cannot enter into a new or renewed fixed-term contract with the same employee for the same or substantially similar role if: the previous contract was a fixed-term contract; there is an effective period of continuous service covering the contracts; and the combination of the previous and new contracts would result in a period of fixed-term employment exceeding two years.
The consecutive contract restriction targets the common practice of ‘rolling’ employees on successive fixed-term contracts without offering ongoing employment. An employee who has been engaged on consecutive fixed-term contracts for more than two years must be offered ongoing employment, or the arrangement is at risk of being found to contravene the Act.
Anti-Avoidance Provisions
The Fair Work Act includes anti-avoidance provisions that apply where an employer enters into arrangements that have the purpose, or the likely effect, of circumventing the fixed-term contract restrictions. This includes using different entity names to engage the same employee, or treating what is effectively a single continuous role as separate engagements.
Exceptions to the Fixed-Term Contract Rules
Certain categories of employment are exempt from the fixed-term contract restrictions:
- A contract of employment for a specific task or project (a true project-based engagement where the term of employment is tied to the completion of the specific project)
- A contract under a training arrangement (for example, an apprenticeship or a graduate program with a defined term)
- Earning above the high-income threshold (employees earning above the Fair Work Act’s high-income threshold are excluded from certain unfair dismissal provisions and some fixed-term contract restrictions)
- A contract covering a period of essential leave (covering a specific absence such as parental leave or extended sick leave)
- Certain government-funded roles with a defined funding period
The project exception is frequently misunderstood. To qualify, the contract must genuinely be for the performance of a specific identifiable task or project, not for the ongoing performance of a role in a business. An employer who creates a ‘project’ label for what is effectively a permanent position does not satisfy the exception.
Auditing your current contracts: a 30-minute exercise
Most exposure under the fixed-term rules is inherited, not created, contracts rolled over by habit long before the limits arrived. The audit is quick: list every current fixed-term arrangement; for each, note the start date of the first contract in the chain (not the current one. The chain is what the rules measure), the number of consecutive contracts, and whether any renewal decision is coming in the next six months.
Anything approaching the two-year mark or a third consecutive contract goes on the review list, with three honest options: convert to permanent (often the right answer for a role that has clearly become ongoing), end the arrangement at term, or confirm a genuine exception applies and document why. The trap to avoid is the reflexive rollover, the renewal signed without anyone checking the chain, which is precisely how businesses convert an administrative rule into an unfair dismissal exposure. This is general information, not legal advice.
Fixed-term contract limits: auditing what you already have
DBA Advisory reviews contract populations against the current limits and flags the ones that need changing before they roll over.
The anti-avoidance provisions are what catch well-meaning employers. Restructuring a role, changing a title or briefly breaking the engagement to reset the clock is exactly the conduct the provisions are aimed at, and the consequence is that the contract is treated as permanent regardless of what it says. If the substance of the arrangement is continuous, the paperwork will not save it.
There is a maximum period, a restriction on consecutive contracts, and a set of exceptions that genuinely apply to some roles. The 30-minute audit in this article is worth running across your current contracts rather than waiting for a renewal to raise the question.
Frequently Asked Questions (FAQs)
From 6 December 2023, a fixed-term contract (including any extensions or renewals) cannot exceed two years in total for the same employee in the same or substantially similar role, unless an exception applies. The two-year limit applies cumulatively across a series of consecutive contracts.
Not without care. The consecutive contract restriction prevents employers from entering into a new fixed-term contract with the same employee for the same or substantially similar role where the combination of the previous and new contract would exceed two years. An employer who genuinely needs to engage the same employee after a gap (for a different role, or after a genuine break in employment) should seek advice on whether the new engagement satisfies the rules.
A fixed-term contract that contravenes the restrictions may be treated as an ongoing (permanent) employment contract, meaning the employee has ongoing employment rights including unfair dismissal protections. The employer may be required to provide notice of termination and, in some cases, severance pay. Employers should review their fixed-term arrangements against the current rules with their employment law adviser.
How DBA Advisory Supports You
Fixed-term contract limits restrict how long a fixed-term contract can run and how often the same role can be renewed on one. The provisions that catch employers out are the anti-avoidance rules, because a sequence of arrangements that each look compliant individually can fail when read together.Â
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Disclaimer
© DBA Advisory 2026. This article is intended as general information only and does not constitute legal or compliance advice. Businesses should seek qualified advice specific to their circumstances and confirm all regulatory references against current guidance before acting on any information contained in this article.
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