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Is There A Time Limit For Debt Collection In Australia?

At a glance:

  • Debts are also subject to statutes of limitations, as are most legal
  • The statute of limitations can also be affected by a court
  • Terms and Conditions and Invoices can be used to prove the debt in a legal

It may surprise you, but a client or customer can have their debt completely erased. Debts are also subject to statutes of limitations, as are most legal matters. A debtor no longer has a legal obligation to repay a creditor if s/he does not take action before the statute of limitation expires. As a result, many businesses place great emphasis on debt collection in Australia.


Debt statute of limitations

The statute of limitations for personal and commercial debt collection may vary on its type and jurisdiction in Australia.

Simple contract debts are subject to a six-year statute of limitations in Australia. Exceptions to this rule include the Northern Territory, where the statute of limitations is three years. Statutes of limitations aren’t time limits for collecting debts; they’re time limits for bringing a claim to court. A limitation period of twelve (12) years applies if the debt is secured by a mortgage or another charge on the property.


Court Judgement

Nevertheless, it isn’t as easy to write off debt after six years. The statute of limitations can also be affected by a court judgment. In most of Australia, the statute of limitations is 12 years after receiving a judgment in your favour. Victoria and South Australia, however, have a 15-year limitation on debts associated with court judgments.

Taking and selling non-protected goods, garnishing your wages or bank account, and examining the debtor’s financial situation in court are all options they can pursue. It is also possible for a court judgment to become “old.” As a result, the debt collector is no longer able to collect the debt and enforce the judgment. The court can, however, extend these limitations under certain circumstances for personal as well as commercial debt collection for corporations.


Statute-Barred Debt

Statue-barred debts are those whose limitation period has expired and to which payments have not been made, and no acknowledgement has been given.

As per the Act, the creditor must bring an action “based on a simple contract or quasi-contract.” For a creditor to preserve their rights, all they need to do is fill their action correctly.

Creditors cannot recover statute-barred debts. It is still possible to negotiate with a debtor, but a creditor cannot threaten legal action because they aren’t allowed to do so. If a creditor attempts to deceive or mislead a debtor, knowing that the debt is unenforceable, penalties are applicable. However, it is possible to petition the courts for an extension at the creditor’s discretion and expense.


Disputes regarding debts

The smart thing you can do is to arrange an affordable repayment plan if you are certain you owe the debt. However, if you disagree with the amount owing or think the debt is not yours, you have the right to dispute it. Contact the debt collector for account information and copies of contracts. When acting on behalf of someone else, collectors can get documents from original creditors or service providers.

An acknowledgement of debt should include the following:

  • Presented in writing;
  • Acknowledger’s signature;
  • Recognize outstanding and unpaid

Towards the end of the limitation period, ask the debtor to acknowledge the debt or make a small payment, resetting the limitation to six (6) years.


Invoices and Terms and conditions inclusion:

To get paid for your products or services, you should include three main items in your ‘Terms and Conditions.’


Product or Service Scope

Proposals or Order Forms specify what products or services the customer wants. It is more likely to be paid if you have a clear scope and fewer disputes.



Customers can agree to well-drafted Terms and Conditions by following the steps outlined below:

  • A signed copy of the Terms and Conditions;
  • Accepting the Terms and Conditions online or by email;
  • Upon receipt of the Terms and Conditions, you can provide the products and services;
  • Paying in full or with a



Payment methods, terms, and requirements should be clearly outlined in your ‘Terms and Conditions.’

  • Customers may pay in full up-front, take a deposit, or pay regularly, g., monthly.
  • When customers pay afterwards, you can decide how many days to the payment may be due in seven days, 14 days, 30 days, etc.
  • You can stipulate in your ‘Terms and Conditions’ that you may stop providing products or services if an invoice is unpaid. Unpaid amounts may be subject to interest or other penalty costs, such as the withdrawal of a discount, but they must be in the terms and conditions.

Hire a debt collector,

And/or, in case of non-payment, take legal action.

Terms and Conditions and Invoices can be used to prove the debt and the value of the demand and responsibilities in a legal dispute.

Ready to get a best solution for your business?

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