Debt Collection in Australia: A Complete Business Guide (2026)

Debt Collection in Australia: A Complete Business Guide

Your invoice to a buyer in Melbourne is 90 days overdue. Phone calls go unanswered. Emails are ignored. You need your money back, but you are unsure where to start in a country with federal regulations layered on top of state-by-state court systems, unique personal property security laws, and strict rules about how collectors can operate.

Australia is a major trading partner across the Asia-Pacific region, with key industries spanning chemicals, food, machinery, minerals, and transport. With a 50-75% chance of collecting on overdue commercial debts, the odds are in your favour if you act early, follow the correct legal procedures, and work with a collection partner that understands the local landscape.

This guide covers the full debt recovery cycle in Australia: amicable collections, legal proceedings (including costs and timeframes), retention of title under the Personal Property Securities Act 2009, enforcement options, insolvency proceedings, and the limitation periods that apply across states and territories.

Amicable Collections in Australia

How the Process Works

Amicable collection is always the first step. At Atradius Collections, we maintain a professional, in-house collection process that focuses on preserving the commercial relationship between creditor and debtor. Our specialists contact debtors both verbally and in writing, adhering to federal and state law at every stage.

When a dispute arises, we analyse the contractual documents, including signed contracts, orders, confirmations, invoices, delivery notes, and any agreed standard terms, to reach an amicable solution. Although it is not common practice in Australia, we can also employ local agents to make site visits to debtors in all areas of the country.

Regulatory Framework

Debt collection practices in Australia are governed at the national level by the Australian Consumer Law (ACL) under the Competition and Consumer Act 2010, and by the ACCC/ASIC Debt Collection Guideline (Regulatory Guide 96). These rules prohibit harassment, coercion, misleading conduct, and the use of documents designed to look like court documents. Compliance is non-negotiable: breaches can lead to regulatory action and reputational damage.

Interest During the Amicable Phase

Depending on the specific legislation in each state and territory, you may be able to charge debtors for interest once legal proceedings are commenced. However, prior to the commencement of legal action, you cannot automatically charge interest unless your terms and conditions or contracts specifically outline a penalty for overdue payment. This makes it essential to include clear late payment interest clauses in your trading terms from the outset.

There is no single statutory late payment interest rate for commercial transactions in Australia (unlike the EU Late Payment Directive 2011/7/EU). Contractual rates of 8-15% per annum are commonly used in Australian B2B contracts and are generally considered reasonable, provided they reflect genuine financing costs and are not punitive.

Debt Collection Costs

In Australia, debt collection costs are not chargeable to debtors unless your terms and conditions or contracts specifically outline exactly which collection costs become the debtor's responsibility and when. Under Australian law, no automatic costs or interest can be added to debts collected by commercial debt collectors. This reinforces the importance of well-drafted trading terms that include a clear costs-recovery clause.

Payment Methods

The most common payment method in Australia is bank transfer. Cheques are virtually obsolete in commercial settings. Direct debiting from debtors' accounts is not offered as part of the standard collection process.

The Atradius Advantage

Atradius Collections maintains experienced local collectors across Australia who understand the regulatory landscape, speak the language, and know the cultural nuances of doing business locally. We contract experienced reporting agencies to assess debtors' financial situations and, depending on the debtor's legal structure, can determine whether they own property to identify the best course of action.

Understanding Australian Business Structures

Before pursuing collection, it is important to understand your debtor's legal structure, as this directly affects liability and enforcement options.

• Sole trader: An individual trading on their own. The sole trader owns all business assets and has unlimited liability, including personal assets.
• Partnership: An association of people or corporations running a business together. All partners (other than limited partners) are liable for financial obligations, even if one partner incurs debts without the others' knowledge or consent.
• Trust: A structure where a trustee holds property or income for the benefit of beneficiaries. Trusts have complex structures, each with its own financial and legal obligations.
• Proprietary limited company (Pty Ltd): A legal entity separate from its shareholders, regulated under the Corporations Act 2001. The company has limited liability, but directors can be personally liable if found to be fraudulent, negligent, or reckless.

Retention of Title (RoT) in Australia

Retention of title is a critical mechanism for any business that supplies goods on credit to Australian buyers. The rules changed significantly with the introduction of the Personal Property Securities Act 2009 (Cth) (PPSA) and the Personal Property Securities Register (PPSR).

How the PPSA Changed the Rules

Under the PPSA, a retention of title clause is treated as a security interest. A simple RoT clause in your trading terms is no longer sufficient on its own. The key concept is perfection: a security interest must be perfected (typically by registration on the PPSR) to be enforceable, particularly in the event of the buyer's insolvency.

Registration Requirements

Sellers can register their interest with the PPSR to protect that interest and the right to repossess goods if the buyer fails to pay. For situations of continuous supply, you need to register only once for each buyer, not for every delivery of goods.

If you fail to register:

• Your security interest vests in the buyer upon administration or liquidation under section 267 of the PPSA.
• You lose the right to seize the goods and become an unsecured creditor.

Purchase Money Security Interest (PMSI)

RoT suppliers can obtain PMSI status, which gives them a higher priority over other secured creditors. To achieve PMSI super priority over inventory, registration must be completed before the goods are delivered. PMSI super priority only extends to goods that remain unpaid. The PPSA also creates a right to proceeds where goods have been used or on-sold (section 32 PPSA), provided your registration and documentation are in order. The PPSA draws a critical distinction under Section 62: for inventory collateral (goods intended for resale or manufacturing), registration must be completed before the grantor takes possession. For non-inventory collateral (such as equipment for the buyer’s own operational use), a grace period of 15 business days after the buyer takes possession applies. Failure to meet the correct deadline for the relevant collateral class results in the total loss of PMSI super-priority.

Bottom line: If you supply goods to Australia on credit, you must have a properly drafted RoT clause incorporated into your trading terms before the contract is made, and you must register on the PPSR before delivery.

Safeguard Measures

If your debtor is unable to settle your claim immediately, there are several ways to secure the debt in your favour without proceeding to court.

• Deed of acknowledgement of debt: Drafted by our solicitors, this cost-effective measure can be used as evidence of the debt if legal action is later disputed in court.
• Personal guarantees: Directors of the debtor company can sign personal guarantees, allowing them a suitable long-term repayment plan (typically over three months).
• Other security: The debtor can offer additional security such as mortgages, assignments of debt, or assets.

Legal Collection Procedures in Australia

When amicable efforts are exhausted, the legal collection process follows a structured path.

Required Documents

To begin legal proceedings, the following documents are needed:

• Copies of the invoices
• A clear statement of account indicating payments and credit notes for the outstanding invoices
• Any contracts and terms and conditions binding both parties, even when a contract was not formally entered into but terms were issued
• As the lawsuit proceeds: copies of contracts, orders, confirmations, delivery notes, and invoices
• In case of dispute: all notes of conversations between you and your debtor via letter and email

Pre-Legal Step: Letter of Demand

It is considered best practice to issue a pre-legal step before taking legal action to give the debtor a chance to pay before incurring costs. A formal letter of demand should clearly state the amount owed, the contractual basis, the deadline for payment (typically 7 to 21 days), and the consequences of non-payment.

For debts owed by companies, a particularly powerful tool is the Corporations Act statutory demand under section 459E. This is a formal demand requiring a company to pay an undisputed debt exceeding AUD 4,000 within 21 days. Failure to comply creates a presumption of insolvency, which can be used as the basis for a winding-up application.

Filing a Statement of Claim

To commence court proceedings, you file a statement of claim. This document sets out the basic details of the debt and informs the debtor that they need to pay or defend the matter within the time frame provided in each jurisdiction after service.

If the debtor does not mount a defence or pay within that time frame, a default judgment application can be filed. The full legal court scale costs and disbursements can be claimed in the statement of claim and become payable upon its issuance, not its service.

Court Jurisdiction

Jurisdiction	Court and Threshold
New South Wales	Local Court: claims up to AUD 100,000 (Small Claims Division up to AUD 20,000)
Victoria	Magistrates’ Court: claims up to AUD 100,000 (arbitration generally used under AUD 10,000)
Queensland	Magistrates Court: claims up to AUD 150,000 (QCAT for minor disputes up to AUD 25,000)
South Australia	Magistrates Court: claims up to AUD 100,000 (Minor Claims Division up to AUD 12,000)
Western Australia	Magistrates Court: claims up to AUD 75,000 (Minor Case Procedure up to AUD 10,000)

Appeals

Appeals from the Local Court are taken to the Supreme Court, making any application expensive. Appeals must be lodged within 28 days from the date of the decision. A judgment debtor may also apply to set aside a default judgment but must show a reasonable explanation for why no defence was mounted and an arguable defence to the claim.

Expected Timeframes and Costs

Proceeding Type	Expected Duration
Undefended standard proceedings	10 to 16 weeks
Defended court procedure	12 months or longer
Bankruptcy/winding-up application	Variable; can take months to years

 

Cost Item	Approximate Range (AUD)
Court filing fees (summons)	AUD 400 - 1,800
Solicitors' costs (summons)	AUD 500 - 1,700
Default judgment (solicitors' costs)	AUD 300 - 750
Enforcement (garnishee/examination/writ)	AUD 500 - 1,000
Bankruptcy/winding-up applications	AUD 8,000 - 10,000 total
Examination notice (corporation)	Approx. AUD 218 filing fee (corporation, NSW)

Interest and Costs in the Legal Phase

When legal action is taken through a court (a statement of claim), the legislation allows for a prescribed amount to be added to the debt to cover court filing fees, solicitors' drafting costs, and prescribed interest. These are referred to as scale costs and are legally added to the amount of debt upon the filing of the statement claim.

Enforcement of Judgments

Once a court judgment is obtained, several enforcement options are available.

Garnishee Order

An order made by the court allowing creditors to recover the judgment debt from the debtor's bank accounts, wages, or from persons who owe money to the debtor.

Examination Notice

If you are unsure about the judgment debtor’s financial position, the process works in two steps. First, an Examination Notice is served directly on the debtor (no court filing required, no fee). If the debtor fails to comply, you may apply for a formal Examination Order, which requires a court filing. The filing fee for an Examination Order is approximately AUD 218 for a corporation in NSW (AUD 109 for an individual), with service fees varying by location and jurisdiction.

Writ for a Levy on Property

An order for the sheriff to seize and sell at auction the debtor's personal property (not land). The sheriff charges AUD 100 per address visit, approximately AUD 75 for auctioning seized goods (more in some areas), and a levy of 3% on monies recovered at auction. Vehicle towing requires a deposit of around AUD 500 (non-refundable).

Bankruptcy (Individuals)

If the debtor has a debt of more than AUD 10,000, bankruptcy proceedings can be brought. The first step is usually serving a bankruptcy notice requiring payment within 21 days. After the 21 days, a creditor's petition must be filed with the Federal Court. Costs can exceed AUD 8,000.

Winding Up (Companies)

To wind up a debtor company, you must prove insolvency by issuing a statutory demand. If the debtor does not respond within 21 days, you can file a winding-up application.

Enforcement Against Real Estate

If the debtor owns real estate, the only way to access this asset is through bankruptcy (individuals) or liquidation (companies).

Insolvency Proceedings in Australia

Insolvency is determined on the basis of the debtor's cash flow. Under the Corporations Act 2001, an entity is insolvent if it cannot pay its debts as they fall due.

Winding-Up Process

A winding-up application is issued to the registered office of the debtor company, normally after the creditor obtains a judgment debt or following failure to comply with a statutory demand within 21 days. If the court orders winding up, an official liquidator is appointed. Creditors can lodge claims and attempt to recover goods delivered under retention of title clauses. Claims can be lodged at any time before the liquidation is finalised.

Voluntary Administration

Typically initiated by directors when they believe the company is insolvent or likely to become insolvent. An independent administrator takes control. An extensive statutory moratorium prevents creditors from commencing or continuing legal proceedings without consent or court leave. The administration ends with a creditors' meeting deciding between a Deed of Company Arrangement (DOCA), liquidation, or return of control to directors.

Small Business Restructuring

Since January 2021, eligible companies with total liabilities under AUD 1 million can use the small business restructuring (SBR) process under Part 5.3B of the Corporations Act. SBR follows a debtor-in-possession model, allowing directors to maintain control while a restructuring practitioner develops a plan.

Filing Claims as a Creditor

To lodge a claim, you need:

• Copies of the invoices
• Copies of the contracts
• Copies of orders, order confirmations, and delivery notes
• Copies of the general conditions of sale, if any
• Copies of any correspondence that may verify the claim

Dividends and Priority

At the end of proceedings, creditors with confirmed debts may receive dividends if funds are available. The legal costs incurred by the creditor who filed the petition are considered a priority and paid first. Recovery rates for unsecured creditors are typically low, often 5-15 cents in the dollar.

Preferential Payments (Rescission)

Payments may be classified as preferential within six months prior to the date of bankruptcy or liquidation. Related party transactions may be void for up to four years prior. If the liquidator disputes these payments, creditors may be forced to refund them.

Expected Timeframe

The duration of insolvency proceedings cannot be predicted. They can range from a few days to many years, depending on complexity.

Limitation Periods

The limitation period for debt recovery is governed by state and territory legislation. For simple contract debts, the general prescriptive period is six years from the original due date. After this period, the debt becomes statute-barred: the courts will not hear an action for payment. Debts under deed may have a 12-year limitation period. In some jurisdictions, a written acknowledgement or part payment can restart the limitation period. A critical exception applies in the Northern Territory, where Section 12(1) of the Limitation Act 1981 (NT) restricts the limitation period for simple contract debts to three years from the date the cause of action accrues. Creditors pursuing debtors in Darwin or Alice Springs must act significantly earlier to avoid their claims becoming statute-barred.

Arbitration and Mediation

If both parties agree to alternative dispute resolution, arbitration and mediation services are available. These are private tribunals that facilitate efficient dispute resolution, including arbitration, mediation, conciliation, and adjudication. Many Australian courts also require or encourage mediation before proceeding to trial.

FAQ: Recovering Debt in Australia

Q: What is the limitation period for debt recovery in Australia?

A: The general prescriptive period for simple contract debts is six years from the original due date in most states and territories. After this period, the debt is statute-barred. Debts under deed may have a 12-year limitation. Important exception: in the Northern Territory, the limitation period for simple contract debts is only three years under the Limitation Act 1981 (NT).

Q: How long do legal proceedings take in Australia?

A: Undefended standard proceedings take an average of 10 to 16 weeks. Defended court procedures can take 12 months or longer.

Q: How much does it cost to file a debt claim in Australia?

A: Issuing a summons costs approximately AUD 400-1,800 in court filing fees and AUD 500-1,700 in solicitors' costs. Default judgment adds AUD 300-750. Enforcement options cost AUD 500-1,000. Bankruptcy and winding-up applications can total AUD 8,000-10,000.

Q: Can I charge interest on late payments in Australia?

A: Yes, if your contract includes a late payment interest clause. There is no automatic statutory entitlement to interest on B2B debts. Contractual rates of 8-15% per annum are common. You cannot charge interest during the amicable phase unless your terms specifically provide for it.

Q: Do I need to register retention of title on the PPSR?

A: Yes. Under the PPSA 2009, retention of title clauses are treated as security interests. Without PPSR registration, your security interest vests in the buyer upon administration or liquidation, and you become an unsecured creditor. For continuous supply, you register only once per buyer.

Q: What happens if my Australian debtor goes into liquidation?

A: An official liquidator is appointed. Creditors must lodge claims. If you have a registered security interest on the PPSR, you have priority over unsecured creditors. Without registration, recovery prospects are typically 5-15 cents in the dollar.

Q: Do I need to be physically present in Australian courts?

A: Generally, no. You can be represented by local solicitors, and many Australian courts facilitate remote attendance.

Protect Your Cash Flow: Act Now

Recovering unpaid invoices in Australia requires a tailored approach that accounts for Commonwealth and state legislation, cultural nuances, and the specific financial circumstances of your debtor. From the complexities of the PPSA and PPSR registration to the multi-layered court system and insolvency regime, the stakes are too high for a generic approach.

Do not let unpaid invoices in Australia damage your cash flow. Atradius Collections has the local expertise, legal knowledge, and on-the-ground presence to recover what you are owed, whether through amicable negotiation or formal legal proceedings.