Late payment interest calculator

When can you charge interest on a late invoice?

You can charge interest on an overdue invoice when your contract expressly allows it, or when a statutory rate applies. In Australia, most commercial contracts include an interest clause — typically expressed as a percentage per annum — that activates once an invoice passes its due date.

Contractual interest

If your credit terms or invoice state an interest rate (for example, "interest of 10% per annum applies to overdue accounts"), that rate governs. Courts will generally uphold a contractual rate provided it is not unconscionably high. Ten percent per annum is the most common rate seen in Australian commercial contracts; rates of 15–18% are also enforceable but may attract scrutiny in disputed matters.

Statutory interest

Where no contractual rate applies, post-judgment interest is set by each state or territory. Victoria applies the Penalty Interest Rate Act 1983 rate, which varies. NSW Supreme Court judgment interest sits around 8–9% p.a. These statutory rates apply to court judgments, not directly to unpaid invoices — though they provide a useful benchmark for pre-litigation demands.

Claiming interest in a letter of demand

A well-drafted letter of demand should state: (a) the principal amount overdue, (b) the interest clause in your contract, (c) the number of days overdue, and (d) the total interest accrued as at the date of the letter. This calculator gives you all four figures. If your debtor disputes the interest, note that the right to interest is a separate cause of action from the principal debt and is routinely awarded in commercial proceedings.

Common interest rate reference

This calculator is an indicative tool only and does not constitute legal or financial advice. Interest entitlements depend on your specific contract terms, jurisdiction and circumstances. Rates shown are illustrative and may not reflect current statutory rates. Always obtain legal advice before issuing a formal demand.