Late Payment of Government Debts (Interest) Act 2013

Qualifying contract: Central to the Act. Defined in section 3 as a “designated contract” where (a) the purchaser is a public authority, and (b) the supplier is a qualifying person or qualifying body. A “designated contract” is a contract for the supply of goods or services, but excludes: a written contract that makes specific provision for payment terms greater than the prescribed number of days, or that makes specific provision for the payment of interest if payment is not made in accordance with the contract; a construction contract under the Building and Construction Industry Security of Payment Act 2009; a contract where the consideration is not or does not include monetary consideration; and any class excluded by regulation. These exclusions mean that suppliers who negotiate contractual interest or longer payment terms lose the statutory protection. This creates a trade-off: a supplier may prefer the certainty of a contractual interest clause over the statutory scheme, but doing so removes the Act’s protections entirely, even if the contractual interest rate is lower or the contractual dispute mechanism is less favourable.

Qualifying person and qualifying body: The supplier must be either a natural person whose principal place of residence is in Australia (qualifying person) or a qualifying body. Qualifying body means (a) a corporation incorporated under the Corporations Act 2001 (Cth), or (b) a not-for-profit entity. Not-for-profit entity is defined as an entity registered or entitled to be registered under the Australian Charities and Not-for-profits Commission Act 2012 (Cth), or any other entity (other than a government entity) not carried on for profit or gain or for the benefit of particular people. This definition, inserted in 2024, broadened the scope beyond the previous “small business” concept which was deleted in 2018. Partnerships, trusts, and unincorporated associations are not covered unless they fall within the not-for-profit definition. A foreign company not incorporated under the Corporations Act is not a qualifying body, even if it carries on business in Australia. The residence requirement for natural persons excludes non-resident suppliers.

Public authority: Defined by reference to the Public Finance and Audit Act 1987 and brought within the ambit by notice published by the Treasurer in the Gazette. This means not all government agencies are automatically covered; the Treasurer must designate them. From a supplier’s perspective, it may not always be clear whether a particular entity is a public authority for the Act’s purposes.

Default event and designated payment period: Section 5 sets out the conditions. The “designated payment period” is the period of days that applies under section 5(1)(e) - i.e., the prescribed number of days after the “relevant day”. The “relevant day” is the day on which an invoice or claim (complying with Treasurer’s instruction and in correct form for payment) is received by the public authority. This definition means the clock starts only when the invoice is in proper form. A public authority can delay the start of the payment period by rejecting an invoice that does not comply with its internal procedures. Section 5(1)(f) requires that the public authority did not dispute a relevant matter within the designated payment period. If the authority initiates a dispute within that period, no default event occurs, and no interest is payable (subject to the dispute outcome under section 7). This dispute loophole is a significant risk for suppliers: an authority can avoid interest simply by raising a dispute (even on a technical matter) within the payment window.

Qualifying debt: A debt created by virtue of a qualifying contract. The operation of the Act is not affected by changes in the identity of parties or assignment of the debt (section 4). This means assignees and successors in title can claim interest.

Treasurer’s instruction: Instruments issued under section 41 of the Public Finance and Audit Act 1987. The Act repeatedly conditions obligations and definitions on compliance with Treasurer’s instructions. These instructions are not reproduced in the Act and may change without parliamentary scrutiny. For example, section 5(1)(c) requires the invoice or claim to be rendered “in accordance with any relevant Treasurer’s instruction”. This gives the Treasurer considerable power to set procedural conditions that could affect the availability of interest.

Suppliers: The Act directly benefits suppliers that are qualifying persons or qualifying bodies and that contract with a public authority for the supply of goods or services. This includes sole traders (natural persons resident in Australia), corporations incorporated under the Corporations Act, and not-for-profit entities such as charities. Suppliers with invoices exceeding $1 million exclusive of GST are excluded (section 5(1)(ba)). This cap is a notable limitation: large projects with single invoices over $1 million are not covered, which may incentivise suppliers to structure contracts to stay under the cap or to request split payments. Suppliers that have negotiated contractual payment terms beyond the prescribed days or contractual interest provisions are also excluded from the scheme entirely (definition of “designated contract” paragraph (a)). These suppliers rely solely on their contractual remedies. The Act also excludes suppliers of construction contracts under the Security of Payment Act, who have their own statutory regime.

Public authorities: The Act imposes obligations on public authorities to pay interest automatically when late (since 2018). This creates a financial liability that must be budgeted for, though interest payments are likely small relative to total procurement. The reporting obligations under section 8 apply only to government departments and statutory authorities with governing bodies. Other public authorities (e.g., those without governing bodies) are not required to report, which reduces transparency for some entities.

Small Business Commission: From 1 July 2025, the Small Business Commission (previously the Small Business Commissioner) is the dispute resolution body for disputes about interest under section 7. Before 1 July 2025, the Small Business Commissioner performs this role. The Commission can specify procedures and resolve disputes in any manner it determines appropriate, and can exercise powers under the Small Business Commission Act 2011. This affects suppliers and public authorities by providing an alternative to court for interest disputes, but the Commission’s determinations are not binding in the same way as a court judgment, though section 7(5) requires the public authority to pay interest as determined.

Taxpayers: Ultimately, the cost of interest payments is borne by the state budget, funded by general revenue. If the Act succeeds in reducing late payment, it may improve government cash flow management and reduce the implicit cost to suppliers, but the direct effect on taxpayers is negligible unless late payment was widespread.

Regulatory bodies: The Treasurer issues instructions and may prescribe the number of days for payment and the interest rate. The Governor makes regulations under section 9. These subordinate instruments give the executive flexibility to adjust the scheme without amending the primary legislation.

Right to interest: Section 6(1) provides that the supplier is entitled to a minimum amount of interest calculated in accordance with the regulations. Importantly, this is a right, not merely a remedy. The minimum interest cannot be reduced below the rate in force immediately before the 2024 Review Amendment (section 6(2)). The supplier cannot contract out of this right? The Act does not contain a provision prohibiting contracting out, but the definition of “designated contract” excludes contracts that make specific provision for payment terms greater than the prescribed number of days OR for the payment of interest if payment is not made in accordance with the terms. This means if the contract itself contains interest or longer terms, the contract is not a designated contract, and the Act does not apply. So effectively, a supplier can contract out by agreeing to interest provisions, but cannot retain the statutory right while also having contractual interest. This is a binary choice.

Duty to pay interest automatically: Since the 2018 amendments, section 6(6) requires the public authority to pay interest within 2 business days of making the payment for the goods or services. This implies automatic calculation and payment without the supplier needing to make a separate claim. The 2018 amendment also deleted the previous requirement for the supplier to give a notice of default. The duty is on the authority, not on the supplier.

Duty to report: Section 8 imposes a reporting obligation on chief executives of government departments and governing bodies of statutory authorities that pay interest in any month. The report must contain information required by a Treasurer’s instruction and be furnished within 21 days (for departments) or at the next regular meeting (for statutory authorities). This creates accountability but also administrative burden. However, if no interest is paid, no report is required, so late payment that does not trigger interest (e.g., because of the $10 de minimis) may go unreported.

Right to dispute: The public authority has the right to dispute a relevant matter within the designated payment period, thereby preventing a default event from occurring (section 5(1)(f)). If a dispute is initiated, no interest is payable until the dispute is resolved. The supplier has the right to refer a dispute about whether interest is payable to the Small Business Commission (section 7(1)). This is the supplier’s only avenue for enforcement; there is no private right of action in court under the Act (though common law claims for breach of contract may exist if contractual payment terms are breached).

Limitation on rights: No interest is payable if the calculated amount is less than $10 (section 6(3)). This de minimis threshold avoids trivial claims but may also discourage small suppliers from pursuing interest for small amounts.

The Act does not impose civil penalties, criminal sanctions, or fines for late payment. The only enforcement mechanism is the obligation to pay interest itself. Section 6(5) makes interest a liability of the public authority, payable from its budget. If a public authority does not pay interest within 2 business days of paying the underlying debt (section 6(6)), the supplier’s recourse is to refer the dispute to the Small Business Commission (section 7). The Commission can determine that interest should be paid, and the public authority must comply (section 7(5)). However, the Act does not specify consequences for non-compliance with a Commission determination. The Commission may have powers under the Small Business Commission Act 2011 to enforce its determinations, but those powers are not detailed in this Act.

The absence of penalties means that a public authority may strategically delay interest payment, knowing that the supplier’s only remedy is to take the matter to the Small Business Commission, which may be costly and time-consuming. The 2 business day requirement in section 6(6) is a procedural duty, but its breach does not attract additional interest or penalties under this Act (interest is not payable on unpaid interest, per section 6(7)). Therefore, the incentive for authorities to pay interest promptly is weak.

The dispute resolution process under section 7 is not a court process. The Small Business Commission may specify procedures and resolve disputes as it determines appropriate. This flexibility can be beneficial for small suppliers, but it also means there is no binding precedent or formal enforcement mechanism. The Commission cannot award costs or impose sanctions beyond ordering that interest be paid.

The Act does not provide for the recovery of interest as a debt in court. A supplier might theoretically bring a separate claim for interest as part of a breach of contract action if the contract implied a duty to pay on time, but the Act does not create a statutory cause of action. This is a significant enforcement gap.

The reporting requirement under section 8 is a form of internal accountability, but it does not lead to external enforcement. Reports go to the minister or governing body, not to any independent oversight body. There is no penalty for failing to report.

Building and Construction Industry Security of Payment Act 2009: Expressly excluded. Construction contracts under that Act are not designated contracts (paragraph (b) of the definition). Suppliers on government construction projects must rely on the Security of Payment Act for progress payments and cannot claim interest under this Act. This is a carve-out that reflects the existence of a separate statutory framework.

Public Finance and Audit Act 1987: This Act defines “public authority” and provides for Treasurer’s instructions. The Late Payment Act depends heavily on these instructions for operational details (e.g., how invoices must be rendered, what information must be in reports). The Treasurer’s instructions are subordinate instruments with binding effect, but they are not part of the Act and may be amended with less scrutiny. Suppliers and authorities must be aware of the current instructions.

Small Business Commission Act 2011: The dispute resolution provisions under section 7 confer functions on the Small Business Commission (from 1 July 2025) and allow the Commission to exercise its general powers under that Act when resolving disputes. This creates a link to a broader small business dispute framework, but the Commission’s powers are not specifically tailored to government debt interest disputes.

GST law: The definition of “GST” and “GST law” in section 3 incorporates the Commonwealth GST regime. Section 5(1)(d) requires that the invoice or claim comply with any requirements as to the imposition of GST between supplier and purchaser. This ensures that the invoice includes proper GST treatment. The $1 million cap in section 5(1)(ba) is expressed as exclusive of GST, so the cap applies to the pre-GST amount.

Corporations Act 2001 (Cth): The definition of “qualifying body” includes a corporation incorporated under the Corporations Act. Suppliers that are not corporations (e.g., foreign companies unregistered in Australia, or incorporated associations under state law) are not qualifying bodies unless they are not-for-profit entities. This interaction limits the Act’s scope to domestically incorporated entities.

Australian Charities and Not-for-profits Commission Act 2012 (Cth): The definition of “not-for-profit entity” references registration under this Commonwealth Act. Suppliers that are not registered charities but are otherwise not-for-profit must rely on the alternative limb of the definition: an entity not carried on for profit or gain or for the benefit of particular people (other than a government entity). This may require interpretation.

Contract law generally: The Act does not override contractual terms; instead, it excludes contracts that make specific provision for payment terms greater than the prescribed number of days or for interest. This respects freedom of contract but means that a supplier who negotiates a payment term of 60 days (if the prescribed number is 30) loses the statutory interest protection. The supplier must rely on contractual breach remedies. This interaction creates an incentive for governments to insist on longer payment terms to avoid the Act’s application.

The Act commenced on 17 February 2014. It has been amended by three subsequent Acts.

Late Payment of Government Debts (Interest) (Automatic Payment of Interest) Amendment Act 2018 (No 19 of 2018, commenced 1 November 2018): This was a major revision. It deleted the definitions of “annual turnover”, “business”, “small business”, and deleted section 3(2) (which likely related to small business). It substituted the definition of “qualifying body” to include not-for-profit entities, replacing the previous small business threshold. It amended section 5(1) to add the requirement that the invoice or claim be rendered to a public authority or other entity in accordance with a relevant Treasurer’s instruction. It substantially rewrote section 6: amended subsection (1), substituted subsection (6) to require payment of interest within 2 business days (previously there was no such timeframe), and deleted subsection (9). It also substituted section 7(1) to refer to the Small Business Commissioner (now Commission) for dispute resolution, and amended other subsections. The transitional provision in Schedule 1 makes the amendments apply only to invoices or claims rendered after the amendment’s commencement. This means the automatic payment regime only applies to invoices from 1 November 2018 onward.

Late Payment of Government Debts (Interest) (Review) Amendment Act 2024 (No 36 of 2024, commenced 1 November 2024): This amendment performed a further review. It amended the definition of “designated contract” (presumably to refine exclusions), amended “designated payment period”, inserted the definition of “not-for-profit entity”, deleted the definition of “prescribed interest rate”, and substituted the definition of “qualifying body” again (likely to incorporate the not-for-profit entity definition). Critically, it inserted section 5(1)(ba) capping the invoice amount at $1 million exclusive of GST. It also substituted section 6(1)-(3) to provide for a minimum interest amount calculated by regulations, with a floor preserving the pre-2024 rate. It deleted section 6(4). Section 6(6) was amended (likely to adjust the 2 business day wording). Transitional provision: amendments apply only to invoices or claims rendered after the amendment’s commencement (1 November 2024).

Statutes Amendment (Small Business Commission and Retail and Commercial Leases) Act 2024 (No 65 of 2024, Part 6 (section 97) commenced 1 July 2025): This amendment changes references in section 7 from “Small Business Commissioner” to “Small Business Commission” and updates procedural language. It reflects the consolidation of the Small Business Commissioner into the Small Business Commission. This amendment is not yet in force as of the date of this analysis (but will be from 1 July 2025). Suppliers and authorities must be aware of the transition period.

The Act does not reference any court cases in its text or legislative history. No reported litigation is mentioned. Given the relatively small sums involved and the availability of the Small Business Commission for dispute resolution, it is likely that most disputes are resolved administratively rather than in court. The Small Business Commission’s determinations are not published in standard law reports. A search of South Australian court records would be needed to determine if any cases have been brought, but the Act as provided does not name any. Practitioners should be aware that the Act does not create a direct right of action in court; enforcement is through the Commission. This limits the potential for judicial interpretation of the Act’s provisions. The definitions, particularly “qualifying body”, “not-for-profit entity”, and “designated contract”, may be subject to interpretation by the Commission, but those interpretations would not be binding precedent. The only way for a court to consider the Act would be if a supplier brought a separate claim (e.g., for breach of contract) and the Act was raised incidentally. The legislative history shows no amendments resulting from litigation, suggesting the Act has not been controversial.

The $1 million cap excludes larger invoices: Section 5(1)(ba) caps the invoice at $1 million exclusive of GST. If a contract involves multiple invoices, each under $1 million, the Act may still apply. But a single invoice over $1 million (e.g., for a large capital purchase) gets no statutory interest. Suppliers on large projects should consider contractual interest provisions.

Contracts with longer terms or interest provisions are excluded entirely: The definition of “designated contract” excludes written contracts that make specific provision for payment terms greater than the prescribed number of days OR that make specific provision for interest. A supplier that negotiates a 45-day payment term (if the prescribed number is 30) loses all statutory protection. Similarly, if the contract says “interest at 5% per annum on late payments”, the supplier cannot claim under the Act even if the contractual interest rate is lower than the statutory rate. This is a binary opt-out. Suppliers should compare the statutory rate with any contractual rate before agreeing to interest clauses.

Disputes within the designated payment period stop the clock: Section 5(1)(f) requires that the public authority did not dispute a relevant matter within the designated payment period. If the authority disputes within that period, no default event occurs. The authority can do this even for trivial or meritless reasons, and the supplier must then go to the Small Business Commission to get interest. This creates a potential for abuse: the authority can delay interest indefinitely by disputing. Section 5(2) requires the authority to comply with any procedure in a Treasurer’s instruction when initiating a dispute, but there is no penalty for non-compliance.

The “prescribed matter” confusion in section 7(1): Section 7(1) says: “If a dispute arises between a public authority and a supplier about whether interest or an amount of interest is payable under this Act on account of a prescribed matter”. The term “prescribed matter” is not defined in section 3. It may be a drafting error; elsewhere the Act uses “relevant matter” (section 5(3)). The disparity could cause confusion about what disputes can be referred to the Commission. A supplier may find the Commission refuses jurisdiction because the matter is not “prescribed”. This is a significant drafting flaw that should be clarified by amendment or regulation.

The 2 business day payment window for interest is short but unenforceable: Section 6(6) requires interest to be paid within 2 business days of the authority paying the underlying debt. If the authority pays principal but delays interest, the supplier’s only recourse is to dispute. The authority may simply ignore the 2 day requirement without consequence, as no penalty applies.

Not-for-profit entity definition may be ambiguous: The alternative limb of “not-for-profit entity” in section 3(1) - “any other entity (other than a government entity) that is not carried on for the purposes of profit or gain or for the benefit of particular people” - may catch community organisations not registered with the ACNC. But determining whether an entity is “carried on for the purposes of profit or gain” may require legal interpretation, and the burden is on the supplier to prove it qualifies.

Foreign suppliers not covered: Qualifying person requires principal place of residence in Australia. Qualifying body requires incorporation under the Corporations Act (or being a not-for-profit). A foreign company without Australian incorporation is excluded, even if it has an Australian branch. This may disadvantage overseas suppliers contracting with the South Australian government.

Construction contracts excluded: Suppliers on government building projects must rely on the Security of Payment Act, which has its own strict timelines and adjudication. The exclusion means they cannot claim interest under this Act for late payment, which may be a less favourable regime.

Treasurer’s instructions as moving target: Many provisions condition compliance on Treasurer’s instructions. These can be changed without parliamentary approval. Suppliers and authorities must keep up to date with current instructions, especially regarding invoice format and dispute procedures.

For suppliers: 1) Confirm that the purchaser is a public authority under the Act (check if designated in the Gazette). 2) Ensure you are a qualifying person (Australian resident individual) or qualifying body (Australian corporation or not-for-profit). 3) Ensure the contract is a designated contract - i.e., not a construction contract, not a contract with specific payment terms > prescribed days or specific interest provision, and involves monetary consideration. 4) Keep invoices at or below $1 million exclusive of GST. If a contract produces an invoice above that, consider splitting into multiple invoices (but ensure each is for a separate supply or milestone). 5) Render invoices in accordance with any relevant Treasurer’s instruction (e.g., submit to correct address, include required information). 6) Track the payment date. If the public authority pays after the prescribed number of days (set by regulation), and has not disputed within that period, you are entitled to interest. 7) Do not need to make a claim; the authority should pay automatically. But if interest is not paid within 2 business days of the principal payment, contact the authority and, if unresolved, refer the dispute to the Small Business Commission (from 1 July 2025; before that, the Small Business Commissioner). 8) Keep records of invoices, payment dates, and communications. 9) Be aware that if you agree to contractual interest or longer payment terms, you lose statutory protection - so compare the contractual rate with the statutory rate before signing.

For public authorities: 1) Identify all contracts that are qualifying contracts under the Act. Ensure that contract terms do not inadvertently exclude the Act if you intend to be covered. (If you want to avoid the Act, include interest provisions or longer payment terms, but this may be seen as anti-supplier.) 2) Implement systems to calculate the prescribed payment period for each invoice. The period starts on the “relevant day” when a compliant invoice is received. Ensure internal accounts payable processes can identify the relevant day. 3) Pay invoices within the prescribed number of days to avoid interest. 4) If you anticipate late payment, consider whether to initiate a dispute within the designated payment period to prevent a default event. But note that disputes should be made in good faith (though the Act does not require that). 5) When paying principal late, calculate and pay the statutory interest within 2 business days of that payment. 6) If interest is paid in any month, prepare a report under section 8 within the required timeframe, containing information specified in a Treasurer’s instruction. 7) Comply with any Treasurer’s instruction regarding the form of invoices and disputes. 8) Train procurement and finance staff on the Act’s requirements, especially the $1 million cap and the exclusion for contracts with interest clauses. 9) For construction contracts, note the exclusion and consider interest provisions in those contracts separately.