For a business owed a relatively small amount — say, between $2,000 and $20,000 — the question of whether to go to a small claims tribunal or use a debt collection agency is a genuinely important decision. Both routes have their strengths, and the right answer depends on the specific circumstances of the debt and the debtor.
Small claims tribunals in Australia
Each state and territory operates a tribunal with a small claims or minor civil claims jurisdiction. Limits vary: the NSW Civil and Administrative Tribunal (NCAT) handles claims up to $10,000 in its Consumer and Commercial Division general jurisdiction; VCAT in Victoria handles claims up to $15,000 in its Civil Claims List; Queensland's QCAT handles claims up to $25,000 for minor civil disputes; and similar thresholds apply in other states.
Advantages of the tribunal route:
- Filing fees are relatively low — generally $50 to $200 depending on jurisdiction and amount.
- Legal representation is typically restricted or discouraged at first instance, which levels the playing field.
- If you win, you get an order — but the order is not automatic money. It must be enforced.
Disadvantages:
- You must prepare and present your own case, which takes time and requires some understanding of what documents to bring.
- If the debtor does not appear and a default order is made, you still need to enforce it — this requires further steps such as examination of judgment debtor, garnishee orders, or warrant to seize property.
- If the debtor disputes the claim, a hearing will be scheduled — possibly months away.
- Debtors who are insolvent or asset-free cannot be made to pay by any court order.
Debt collection agency
A debt collection agency contacts the debtor, applies pressure, and negotiates payment — without the need for you to prepare a legal case or attend a hearing.
Advantages:
- Specialist contact skills and professional persistence often produce payment where internal follow-up has failed.
- No upfront cost in most "no recovery, no fee" arrangements.
- The process is faster than waiting for a tribunal date.
- A credit bureau listing can be a powerful incentive for a debtor who values their credit rating.
Disadvantages:
- Success fees reduce your net recovery.
- A determined debtor who refuses to pay cannot be compelled without legal proceedings — the agency has no coercive power.
The practical answer
For debts where the debtor has the means to pay but is avoiding payment, an agency is often faster and less burdensome than tribunal proceedings. For debts where the debtor genuinely disputes liability, a tribunal determination is needed. For debts where the debtor is clearly insolvent, neither route produces meaningful recovery — the question becomes whether the amount justifies a proof of debt in any administration.
Speak to Merion about the most efficient route for your specific debt — we can advise on whether agency recovery or legal proceedings is the better starting point.