Your business has been named in a scathing Google review. A competitor has told a major client something untrue about your workmanship. A post about your company is spreading on social media. You want to sue for defamation, yet there are times when your business cannot sue for defamation under Australian law.

The restriction catches many business owners by surprise. You expect that because someone said something false and damaging about your company, you can defend it in court. The law takes a different view. Understanding the rules before you spend money on legal action can prevent an expensive dead end.

Why the law restricts corporate defamation claims

Defamation protects personal reputation. The law has always treated a company's reputation differently from an individual's. A large corporation can respond to criticism through advertising, public statements and the ordinary workings of the marketplace. It does not suffer the emotional distress, social exclusion or personal humiliation that a person experiences when their good name is attacked.

The policy choice is deliberate. If every company could sue, a business with deep pockets could silence legitimate criticism by threatening litigation. The defamation legislation applying in each Australian state and territory reflects that concern by barring most corporations from bringing a claim, while carving out a defined exception.

The excluded corporation exception

Not every business is barred. The legislation allows an excluded corporation to sue. Broadly, these are:

  • not-for-profit corporations; or
  • corporations with fewer than 10 employees that are not associated entities of another corporation.

Not-for-profits and small businesses with fewer than 10 staff can bring defamation proceedings. A family-run cafe with four employees and no corporate links may have standing. A retail chain with 500 staff cannot, no matter how serious the damage to its name.

Not-for-profit corporations may include charities and similar bodies, provided they do not distribute profits to members. Bodies incorporated for purposes other than securing a financial profit for their members will generally fall within the definition. For a closer look at how these rules operate, see our guide to the corporate defamation rules in Australia.

How the 10-employee test works

The employee count is not always straightforward. Permanent and part-time staff count towards the total. The legislation also asks whether the corporation is an associated entity of another corporation, which can bring staff from related companies into the calculation. A business with eight employees that sits within a larger corporate group may not qualify.

Timing matters too. The test is generally assessed at the time the defamatory matter was published, not when you issue proceedings. If your company had nine employees when the review went online and fourteen now, the earlier date may still leave you eligible. If the position changed the other way, the analysis becomes more difficult.

The serious financial loss hurdle

Being an excluded corporation is only the first step. In most Australian jurisdictions, a corporation that can sue must also prove serious financial loss flowing from the publication. A court will not presume the loss from the mere fact that something defamatory was published. You need evidence: a contract that fell through, a client who cancelled, orders that stopped coming.

The serious financial loss requirement came in with the Stage 1 reforms to the defamation legislation, which commenced in most states and territories on 1 July 2021. Western Australia has not adopted those reforms, so the position differs there. The Northern Territory has adopted the reforms, with commencement on 10-11 August 2025. If the publication occurred across several jurisdictions, which is common for online content, the analysis becomes more complex again.

When your business cannot sue for defamation, what are the alternatives?

If the corporate claim is closed, you are not without options. Several legal routes can protect your commercial interests without relying on the defamation jurisdiction.

A personal claim for owners and directors

Many attacks on a small business also defame the person behind it. A review that says the owner is dishonest, incompetent or a fraudster may support an individual claim, even if the corporate claim fails. The publication must carry a defamatory imputation about you personally, not just about the company. Statements that only criticise the product or service, without reflecting on the people who run the business, are harder to fit within a personal claim.

Public bodies face an even stricter rule. The same alternative routes discussed below can apply to them, but the circumstances are different again.

Injurious falsehood

Injurious falsehood protects against false statements about your goods or services that cause financial loss. It is not restricted by the corporate exclusion rule, so companies of any size can pursue it. The price of entry is malice: you must show the publisher knew the statement was false, intended to injure you, or acted with reckless indifference to the truth.

That is a demanding test. Competitors who spread rumours usually do so quietly, and proving their state of mind requires documents, messages or admissions that can be hard to obtain. The claim also requires proof of actual financial loss, not just reputational damage.

Misleading and deceptive conduct vs defamation

Section 18 of the Australian Consumer Law prohibits misleading and deceptive conduct in trade or commerce. This is a common alternative to defamation for businesses, because the corporate exclusion does not apply and any business can bring a claim. A competitor's false statement about your products, or a review that misrepresents what you actually sell, can fall within its scope.

The remedies differ from defamation. You cannot recover damages for hurt feelings or reputational harm as such. But you may obtain damages for provable loss, along with injunctions and corrective advertising orders. The proceedings also run in different courts and carry different procedural requirements, including their own time limits.

For companies facing a viral post that damages the brand, acting quickly on removal and evidence preservation matters regardless of which legal route is open. A defamation lawyer can also assist with negotiating removal, corrections or an apology without issuing proceedings at all.

Practical steps to take now

Start by preserving evidence. Screenshot the publication, note the date, the URL and the author. If the post was taken down before you captured it, your legal options become harder to pursue. Store everything in a folder you can share with a lawyer.

Then identify who made the statement and what it actually says about you. A bad review about a broken product may not defame anyone. A false allegation that you deliberately defrauded a customer almost certainly does. The distinction can determine whether you have a claim at all.

Finally, get advice before you commit to a course of action. Defamation proceedings are expensive, and standing issues are exactly the kind of problem best identified early. A solicitor can assess whether the corporate exception applies, whether an individual claim is open, or whether injurious falsehood or misleading and deceptive conduct offers a more realistic path.

This is general information only, not legal advice. You should obtain independent legal advice about your specific circumstances.