For most debts in Australia, the limitation period is six years. The Northern Territory is the exception at three. This clock usually starts from the date payment was due and not made, or from the last written acknowledgment of the debt.

ASIC’s MoneySmart explains it simply: if more than six years have passed (three in the NT) since the last payment or written acknowledgment, and there’s no court judgment, the debtor will generally have a strong defence if the matter goes to court.

The key point is often misunderstood. These laws limit the right to sue, not the right to contact or seek payment. Creditors can still write to the debtor and pursue recovery. Confusing the two can lead to businesses writing off recoverable debts or spending time chasing debts that are no longer legally enforceable.

One more thing worth knowing up front. Court judgments have a longer enforcement window than the original debt itself. We'll get to that. First, the basics of how this all hangs together, including how the debt recovery process and time limits interact in active collection.

The “cause of action” starts when the creditor first has the right to sue. For a standard unpaid invoice, that’s usually the day after the payment terms expire. For a loan, it’s the day a scheduled repayment is missed. It’s a small date, but it matters. Getting it wrong by even a month can affect whether the whole claim is still enforceable.

The clock starts when the debt becomes payable. Not when the invoice was issued, and not when the customer went quiet.

Written acknowledgment or part payment resets it. A signed letter, an email admitting the debt, or even a small payment can restart the six-year period in full.

Statute-barred doesn't mean erased. The debt still exists. The creditor just can't enforce it through the courts. There's a big difference, and we'll come back to it.

Each state and territory has its own Limitation Act. The general rule is six years for simple contract debts, consistent across Australia except the Northern Territory, which is three years. But the details vary, especially for deeds and court judgments.

Here’s the summary, then the details.

New South Wales

Section 14 of the Limitation Act 1969 (NSW) sets a six-year period for actions founded on contract, including quasi-contract, running from when the cause of action first accrues. Deeds get 12 years. If you're chasing debt recovery in Sydney, the six-year window is the one that matters most for unpaid invoices and standard trade debts.

Victoria

Section 5 of the Limitation of Actions Act 1958 (VIC) gives you six years for simple contracts, but 15 years for actions on a bond or other specialty, and 15 years for actions upon a judgment. That's a longer post-judgment window than most states. For Victorian debt recovery, the same accrual logic applies as everywhere else.

Queensland

Under section 10 of the Limitation of Actions Act 1974 (QLD), it's six years for simple contract or quasi-contract, and 12 years for actions upon a judgment. We deal with this constantly in Queensland debt recovery, where the post-judgment runway gives creditors real time to enforce.

Western Australia

Section 13 of the Limitation Act 2005 (WA) sets a general six-year period from when the cause of action accrued, unless a different period applies. WA modernised its limitation regime in 2005, so older debts that pre-date the Act may sit under transitional provisions. Worth checking before relying on the headline rule.

South Australia

Six years for simple contract debts under the Limitation of Actions Act 1936 (SA). Judgments run for 15 years in South Australia, and also 15 years in Victoria. Deeds also carry a 15-year limitation period in South Australia.

Tasmania

Six years for simple contract debts under the Limitation Act 1974 (TAS). Judgments are enforced for 12 years.

Australian Capital Territory

Six years for simple contract debts under the Limitation Act 1985 (ACT). Same 12-year window for judgments as NSW.

Northern Territory

Section 12 of the Limitation Act 1981 (NT) is the outlier. Three years for actions founded on contract, including quasi-contract, from the date the cause of action first accrues. If your debtor is in Darwin and the invoice is two and a half years overdue, you don't have the breathing room you'd have anywhere else in Australia.

A debt becomes statute-barred when the limitation period has expired and there has been no payment or written acknowledgment in that time. At that point, the legal right to sue is lost.

But the debt itself doesn’t disappear.

This is where people often get confused. “Statute-barred” doesn’t mean the debt is wiped. It means a court will not enforce it if the debtor raises the limitation defence. The creditor can still request payment, and the debtor can still choose to pay. If they do, see the next section, because that action can restart the limitation period.

What a creditor cannot do is threaten legal action on a statute-barred debt. Pursuing court action you know is barred, or implying you will, is misleading conduct under ASIC and ACCC guidance and carries penalties. Get this wrong and you're looking at a complaint to AFCA, not a recovery. Our view on compliance when chasing older debts is simple. If you're unsure whether a debt is barred, treat it as barred until you've checked.

This is the single most important lever a creditor controls, and it's the one most businesses don't use until it's too late.

Two things reset the limitation period in full. A written acknowledgment of the debt by the debtor, or a part payment made by the debtor. Either one, and the six-year clock starts again from zero.

Written acknowledgment means exactly what it sounds like. A signed letter, a clear email ("I know I owe the $14,000, I'll pay when I can"), or any document that admits the debt exists and remains unpaid. Verbal admissions don't count. It has to be in writing, and it has to be from the debtor or someone authorised to bind them.

Part payment is the trap. A debtor pays $500 off a five-and-a-half-year-old $20,000 debt, and that single payment resets the entire balance to a fresh six years.

Now the warning. This works both ways. As a creditor, accepting a part payment on a near-expired debt can be a deliberate, lawful strategy to extend your recovery window. But accepting one without realising what it does, particularly around EOFY when businesses are scrambling to clean up the ledger, can quietly revive debts you'd written off or commit you to debts you can't collect on.

Most businesses don't audit which debts are approaching the six-year mark. They should. Before accepting any payment on an old account, you need to know exactly where it sits on the clock. Run a free recovery appraisal to check whether an old debt is still actionable.

These two get confused constantly. They're separate rules under separate laws.

The statute of limitations governs the right to sue. Six years for simple contract debts under the relevant state Act (three in NT). Once expired, the creditor can't enforce through the courts.

Credit file retention is governed by the Privacy Act 1988 and credit reporting rules. A default listing stays on a credit file for five years. A court judgment listing stays for five years from the date of judgment. Serious credit infringements stay for seven.

So a debt can be statute-barred (over six years old, no payment, no acknowledgment) and still appear on a credit file if the original default was listed within the five-year window. The reverse is also true. A debt can be inside the limitation period and have already dropped off the credit file because the default was listed more than five years ago.

Removing a default isn't the same as removing the right to sue. Two different timelines, two different laws, two different processes.

Once you've obtained a court judgment, a new clock starts. In most jurisdictions (NSW, QLD, WA, TAS, ACT, NT) you have 12 years to enforce that judgment. In Victoria and South Australia, you have 15.

Enforcement options include garnishee orders against wages or bank accounts, examination of the debtor's financial position, writs against property, and orders for seizure and sale of non-protected goods. Some matters are best handled through specialist litigation and judgment enforcement, particularly where assets need tracing.

A judgment can also go "stale." If you sit on it too long without enforcing it, you may need to apply to the court for leave to enforce, and that's not guaranteed. Renewal is possible in most jurisdictions, but it's an application, not a right.

Most businesses leave this until year 5.5. That's already too late. Here's the operator's checklist.

1. Audit your ledger now. Pull every debt over four years old. Flag anything approaching the five-year mark for action.

2. Get written acknowledgement before year 6. A signed admission, even an email confirming the balance, resets the clock by another six years. Cheapest move you'll ever make.

3. Don't rely on internal chasing for the past 60 days. For older accounts, internal follow-up beyond a single final demand yields diminishing returns. Hand it to a specialist.

4. Be deliberate about part payments on old debts. If a debt is close to expiry, accepting a small payment can revive your right to sue. Make that choice consciously, not by accident.

5. Escalate to legal before year 5. Once you cross 5.5 years, you're racing the clock. Issue proceedings while you still have runway.

6. Use a specialist who knows your jurisdiction. State rules diverge on deeds, judgments, and accrual dates. Get it wrong and the matter dies in court.

If you're sitting on an aged ledger now, get a view on what's still actionable through commercial debt recovery before limitation periods expire.

Every debt has a point in time where action matters most. The longer it sits on your ledger, the harder it can be to recover.

Get a free debt recovery appraisal before you commit. No collection, no fee.

With over 20 years of experience in commercial debt recovery, in-house legal support through E C Legal, and more than $120M recovered, eCollect helps businesses make informed decisions about what to pursue and how.

• MoneySmart, Dealing with debt collectors (ASIC)

• Limitation Act 1969 (NSW) s14

• Limitation of Actions Act 1974 (QLD) s10

• Limitation of Actions Act 1958 (VIC) s5

• Limitation Act 2005 (WA) s13

• Limitation Act 1981 (NT) s12