A limitation period is the time window within which a creditor can start court proceedings to recover a debt. After that window closes, the debt is not extinguished — the debtor still owes the money — but the creditor loses the right to sue for it. For commercial creditors, understanding this clock is essential.
How long is the limitation period?
For most commercial debts in Australia, the limitation period is six years from the date the cause of action arose — typically the date the debt fell due. This applies in Queensland (Limitation of Actions Act 1974), Victoria (Limitation of Actions Act 1958), New South Wales (Limitation Act 1969) and the ACT (Limitation Act 1985). The specific period can depend on the nature of the contract and the jurisdiction, so verify the applicable rule for your situation.
What resets the clock
In most Australian jurisdictions, certain actions restart the limitation period from scratch. The most significant are: a written acknowledgement of the debt by the debtor, and a part payment. If a debtor pays even a small amount on account, the limitation period may restart. The same may apply if the debtor sends you a letter acknowledging the debt. This is why documentation of any partial payment or acknowledgement is important.
The practical impact
The most important practical lesson is not the six-year rule itself, but what it implies about acting early. An account referred for recovery at 60 days has nearly six years of legal options ahead of it. An account that has been quietly sitting in your ledger for five and a half years has almost none. The window closes whether or not you act.
Old accounts are still worth referring
Even an account close to the limitation period may still be recoverable without court proceedings. Professional contact, a letter of demand and structured follow-up resolve many accounts without litigation. The limitation period is the final backstop — but it is not the first thing to reach for.
Limitation law is complex and fact-specific. This article is general information only — seek legal advice about your specific circumstances.
Refer your account — the earlier the better, but late is better than never.