Every debt in Australia has a limitation period — a window within which you must commence legal proceedings. Miss it, and the debt becomes statute-barred: it still exists, the debtor still owes it morally, but a court will not enforce it. For B2B trade debts, this is one of the most overlooked risks in managing aged receivables.
The standard limitation period: 6 years
For most commercial trade debts (unpaid invoices, professional fees, trade credit accounts), the limitation period is 6 years from when the cause of action arose — typically the invoice due date, or the date of the last formal acknowledgment of the debt.
| State/Territory | General debt limit | Note |
|---|---|---|
| NSW | 6 years | Limitation Act 1969 |
| VIC | 6 years | Limitation of Actions Act 1958 |
| QLD | 6 years | Limitation of Actions Act 1974 |
| SA | 6 years | Limitation of Actions Act 1936 |
| WA | 6 years | Limitation Act 2005 |
| TAS | 6 years | Limitation Act 1974 |
| ACT | 6 years | Limitation Act 1985 |
| NT | 6 years | Limitation Act 1981 |
When does the clock start?
The 6-year period runs from the date the debt became due and payable — not the date the invoice was issued. For a 30-day invoice issued on 1 January 2020, the clock starts on 31 January 2020 and expires on 31 January 2026.
What resets the clock?
Two events can restart the limitation period: (1) a written acknowledgment of the debt by the debtor — even a partial payment note or an email saying 'I know I owe this, I'll pay soon' — and (2) a part payment. Both reset the 6-year period from the date of acknowledgment or payment.
This is why getting something in writing from a debtor is so important, even if they're not paying yet. An email acknowledging the balance restarts the clock, giving you another 6 years from that date to pursue legal action.
Secured debts and mortgages
Secured debts (where the debt is attached to property via a mortgage or PPSR registration) have different and generally longer limitation periods — 12 years in most states for the security instrument itself. This applies to trade creditors who have registered a PPSR security interest.
What happens when a debt is statute-barred?
A statute-barred debt cannot be enforced through the courts. However, the debt itself does not disappear — you can still request payment, and the debtor can still voluntarily pay. What you cannot do is threaten legal action or issue a formal demand implying court action is imminent, as this would breach the ACCC/ASIC Debt Collection Guideline.
Practical implications for managing aged receivables
- Review your aged receivables regularly — anything approaching 5 years needs immediate attention
- Place accounts with a collection agency well before the 6-year mark to allow time for recovery attempts before limitation
- Obtain written acknowledgments from debtors wherever possible to reset the clock
- Register PPSR interests on high-value trade credit to benefit from the longer secured limitation period
- Don't assume aged debt is unrecoverable — even 4–5 year old debts are frequently collected commercially
Recovia accepts placements on commercial trade debts up to 5 years old — and our Engage digital outreach often recovers accounts that creditors had written off. Speak to a specialist about your aged book.