How long can a debt legally be collected in Australia?
Updated: Sep 6, 2021
You may recall that in previous blog articles, we have looked at the limitation period across each State and Territory in Australia and how this impacts debt collection.
As it has been some time since we published our last article, it is certainly worthwhile as a refresher.
What Is A Statute Barred Debt?
Statute barred debts are debt where the appropriate limitation period has expired for a debt to be legally collected. This varies across Australia and ranges from 3-6 years for a simple contract to 12-15 years for a Judgment Debt. The table below summarises the appropriate limitation period for each State and Territory:
When does the limitation period start?
The limitation period starts from what is referred to as a "right of action". This right of action is not particularly straightforward to explain in this article however it can be interpreted as when a debt becomes due, either because a contractual payment is required, or because an instalment that fell due is defaulted on as set out in the contract.
Can it be extended? The limitation period can be extended when payment is received or the debt is acknowledged. There are other circumstances that may extend the limitation period however it would be best to obtain your own independent legal advice regarding those circumstances.
How is a debt acknowledged?
The legislation surrounding the limitation period is very specific in relation to what must occur for a debt to be acknowledged. In NSW, the acknowledgement must:
be made by the customer or an authorised person acting for and on behalf of the customer; and
must be made in writing and signed; and
constitute a clear knowledge that the debt exists and remains unpaid
The end of the limitation period In NSW the legislation is very specific in that when a debt reaches the limitation period, the debt is extinguished and a demand for payment cannot be made. Payments received from the customer after the limitation period would need to be refunded.
Other States and Territories however do not extinguish the debt but legislation limits the available options to recover the debt. In Victoria, for example, while a demand for payment cannot be made, payments may still be accepted as a reduction of the debt.
At LCollect we have developed systems that ensure that debts reaching the limitation period are treated in accordance with the appropriate State legislation.
Need more information?
If you would like to discuss this article or our commitment to compliance please speak with us on (02) 8923-1600.
Disclaimer: Please note that this article does not constitute legal advice. You should obtain your own independent legal advice from a qualified legal professional.