Silo 1 · Global Late Payment Law
Australian Business Payment Terms
By Santanu Sarma — Mathematical Economics & Public Finance · Updated June 2026
Unlike the US, UK, EU, and Canadian frameworks in this series, Australia has no statute that automatically grants a creditor interest or compensation when a commercial invoice goes unpaid. Late payment in Australia is governed almost entirely by what your contract says, backstopped by common-law penalty doctrine, a transparency-only reporting regime for large payers, and sector-specific construction statutes.
There Is No National Late-Fee Statute
If your contract is silent on interest, you generally have no automatic right to charge it on an unpaid invoice outside litigation. If your contract does specify a late fee, the High Court's penalty doctrine still constrains how high it can go. In Paciocco v Australia and New Zealand Banking Group Ltd (2016), the High Court confirmed that a contractual charge for a breach is an unenforceable penalty only where it is out of all proportion to the legitimate interests the fee was protecting — not simply because it is generous to the creditor. A late fee tied to a sensible estimate of administrative cost, lost capital, and credit risk is on solid ground; one calculated to punish rather than compensate is not.
The Payment Times Reporting Act: Transparency, Not a Mandate
The Payment Times Reporting Act 2020 (Cth) does not set a payment deadline. It requires large businesses and government enterprises — entities with consolidated annual income over $100 million — to report, every six months, how quickly they actually pay small business suppliers.
| Classification | Threshold (95th Percentile Payment Time) | Consequence |
|---|---|---|
| Fast small business payer | 20 days or less | Publicly listed by the Regulator as fast-paying |
| Slow small business payer | More than 30 days | Required to publish "slow payer" status on its own website (from reporting periods starting 1 July 2024) |
There is no penalty for paying slowly beyond the reputational one — no statutory interest, no fixed compensation. The leverage this regime gives a small supplier is informational: check the Payment Times Reports Register before extending trade credit to a large customer, since their actual payment behaviour is public record.
Security of Payment Acts: Construction Is Different
Construction is the one sector where Australia does legislate a payment right directly. Each state and territory has its own Security of Payment Act — the NSW Building and Construction Industry Security of Payment Act 1999 is the model most others were built from. These Acts imply a statutory right to a progress payment regardless of what the contract says, and set a default due date (commonly 10 business days after a valid payment claim is served, absent a contract term) if the parties haven't specified one. Critically, the right to make a payment claim and pursue rapid adjudication exists independently of the underlying contract — a contract cannot contract it away. The specific deadlines and adjudication timeframes differ from state to state, so check the Act in the jurisdiction where the work was performed rather than assuming NSW's numbers travel.
The Fallback: Court-Set Judgment Interest
Once a dispute reaches court, judgment interest rates take over — set by each state's Supreme Court rules, harmonised in mechanism (though not in figure) across jurisdictions by the Council of Chief Justices' Discount and Interest Rate Harmonisation Committee. NSW publishes its rates twice yearly:
| Period | Pre-Judgment Rate | Post-Judgment Rate |
|---|---|---|
| 1 Jan – 30 Jun 2026 | 7.60% | 9.85% |
These rates sit well above the RBA's cash rate target — held at 4.35% as of the Reserve Bank's 16 June 2026 meeting — reflecting the judgment-rate convention of pricing in a margin over the risk-free benchmark rather than tracking it directly.
The Formula
Interest = Principal × Daily Rate × Days Overdue
Worked example: An $8,000 invoice litigated to judgment in NSW, accruing pre-judgment interest at the H1 2026 rate of 7.60% over a 90-day pre-judgment period.
Interest = $8,000 × 0.000208 × 90 = $149.92
Outside litigation and outside construction, the number you can actually charge is whatever rate you wrote into the contract before the work began — provided that rate would survive a penalty-doctrine challenge. There is no statutory floor doing the work for you.
This article is informational and reflects published Commonwealth and NSW statutory mechanics as of June 2026. It is not legal advice. Security of Payment Act defaults vary by state and territory and court interest rates reset periodically — confirm the current published rate and applicable statute with counsel before relying on a specific figure.