Interest on Unpaid Debts in Queensland

Interest on Unpaid Debts in Queensland can arise under an enforceable contract, a court’s discretionary award before judgment, or the statutory rules applying to a judgment debt. An overdue invoice does not, by itself, entitle a creditor to charge any rate it chooses. For 1 July to 31 December 2026, the published statutory default-judgment rate is 8.35% per annum and the judgment-debt rate is 10.35% per annum. The applicable basis, period and calculation must be identified separately.

A creditor may have a sound claim for the principal and a poor claim for interest. The usual problem is not arithmetic. It is an interest term that was never agreed, a starting date that cannot be justified, or a court rate applied to the wrong stage of the dispute.

This guide deals principally with ordinary commercial debts pursued in Queensland’s Magistrates, District and Supreme Courts. The Civil Proceedings Act 2011 (Qld), section 3, identifies those courts. QCAT proceedings, regulated consumer lending and debts governed by special legislation require their own analysis; a court interest table should not simply be transferred to those settings.

When can you claim Interest on Unpaid Debts?

Start with the agreement. If it contains an enforceable interest clause covering the overdue amount, the creditor’s entitlement depends on that clause. If there is no contractual or other entitlement to interest as of right, section 58 of the Civil Proceedings Act permits the court to award interest when giving judgment. After a money order is made, section 59 governs statutory interest, subject to the court’s order and the section’s exceptions.

These are different legal routes. Describing every interest claim as “statutory interest” conceals questions that determine whether the amount is recoverable.

Interest on Unpaid Debts should therefore be analysed before the demand is sent. A demand that adds an unsupported interest figure can turn a straightforward recovery into an avoidable argument about the creditor’s accounts.

Contractual Interest on Unpaid Debts

The interest clause must be part of the agreement

A signed credit application or loan agreement containing an interest clause provides a much stronger starting point than a notation added to an invoice after the transaction. An unsigned term is not necessarily ineffective, but the creditor must establish how it became part of the bargain. Acceptance, notice of the terms and an established course of dealing may matter.

The evidentiary question is concrete: what did the debtor agree to, and when? Collect the quotation, acceptance, credit application, terms supplied at the time, relevant emails and invoice history. Our guide to proving a debt in court through documents and evidence explains the records needed to establish the underlying obligation.

An invoice stating “interest at 2% per month” is not a substitute for that evidence. The creditor cannot assume that issuing the invoice unilaterally varied an existing contract. Interest on Unpaid Debts rests on the agreement actually made, rather than the terms the creditor wishes it had made.

Read the trigger and the calculation together

Before calculating contractual Interest on Unpaid Debts, identify:

• the payment due date and any notice or grace period;
• whether the clause covers overdue invoices, an accelerated loan balance or some other amount;
• whether the rate is annual, monthly, fixed or variable;
• whether interest is simple or compounded, and any agreed compounding interval;
• whether an ordinary rate is replaced by a default rate, or a margin is added to it; and
• what the agreement says about interest following termination, acceleration or judgment.

A default rate of 15% does not necessarily mean 15% plus the ordinary lending rate. Likewise, monthly accrual does not necessarily authorise monthly compounding. Those questions depend on the wording.

Do not assume that a contractual interest entitlement continues unchanged after judgment. Review the clause, the relief sought and the order made. A creditor should not keep charging its invoice rate on top of statutory judgment interest for the same liability and period without establishing a distinct legal entitlement.

Worked example — an agreed annual rate

Assume a supplier and customer expressly agreed to simple interest at 12% per annum on overdue invoices, accruing from the day after payment falls due. A $40,000 invoice remains unpaid for 90 interest-bearing days. Using a 365-day basis, the calculation is:

$40,000 × 0.12 × 90 ÷ 365 = $1,183.56.

This is a hypothetical illustration, not a conclusion that 12% is appropriate for every contract. Change the agreed starting date or day-count convention and the answer may change. If a payment reduces the principal halfway through the period, the calculation must also reflect that reduction, subject to the proper allocation of the payment.

The supplier’s right to that Interest on Unpaid Debts comes from the enforceable contract. It does not come from the Queensland Courts rate table.

Can a default interest clause be unenforceable?

A rate appearing in a signed agreement is not the end of the inquiry. A default provision may be challenged as a penalty. The creditor needs to understand what interest the provision protects and how the additional burden relates to the consequences of default.

A higher default rate is not automatically a penalty. Equally, labelling a charge “interest” does not put it beyond scrutiny. The wider analysis is covered in our guide to default interest clauses.

Case example — Paciocco and the limits of a penalty argument

In Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28, the High Court upheld ANZ’s credit-card late payment fees by majority. The challenged charges were fixed fees, not a Queensland statutory interest award. The case nevertheless matters when assessing default provisions.

The Court did not confine the bank’s protected interests to the immediate administrative expense of processing a late payment. The reasons considered broader financial consequences, including provisioning and regulatory capital costs. See particularly Gageler J at [99]–[100] and Keane J at [216]–[223].

For Interest on Unpaid Debts, the lesson is that comparing a default charge only with the cost of sending a reminder is too narrow. The decision does not give every creditor permission to impose any default rate. The contractual setting, the interests protected and the scale of the charge still require examination.

Consumer and small business contracts need a separate check

The penalty doctrine is not the only possible challenge. Standard form consumer and small business contracts may also be subject to unfair contract terms legislation. The ACCC’s guidance on contracts explains the current regime and the changes commencing on 9 November 2023. A term surviving a penalty argument is not necessarily valid under every applicable statutory regime.

Before relying on Interest on Unpaid Debts in such a contract, check the applicable legislation, the contract’s date and whether it was renewed or varied. Financial products and regulated credit need particular care. This article’s ordinary commercial debt analysis should not be treated as a substitute for that review.

Statutory Interest on Unpaid Debts before judgment

Section 58 is a discretion, not an invoice surcharge

Under section 58(3), the court determines the appropriate interest award. The provision allows choices about the amount attracting interest, the period and the rate. The cause of action date matters: in an ordinary invoice claim, the agreed payment obligation and when it was breached need to be established.

Do not equate that date automatically with the invoice date. An invoice issued on 1 March with payment due 30 days later does not ordinarily establish that payment was already overdue on 1 March. A loan repayable on demand raises a different question about the agreement’s terms and the significance of the demand.

Section 58(2)(b) excludes money on which interest is payable as of right, including under an agreement. Contractual interest and section 58 interest are therefore not cumulative additions on the same sum for the same period. If the contractual entitlement is disputed, the pleading may seek statutory interest in the alternative, with the alternatives kept clear.

Statutory Interest on Unpaid Debts also does not authorise pre-judgment interest on interest: section 58(4)(a). A spreadsheet that rolls each month’s statutory interest into the next month’s principal is using the wrong method.

Case example — Keeley and a reasoned approach to rates and delay

In Keeley & Ors v Horton & Anor [2016] QCA 253, the Queensland Court of Appeal addressed interest after an appeal increased damages for breached warranties in a share sale. This was a damages case, rather than an unpaid invoice claim.

At [6]–[8], the Court rejected the proposed deferral of interest and exclusion of a trial-adjournment period. Both parties had benefited from the opportunity to amend pleadings and gather evidence. At [10]–[12], it explained why the prescribed default-judgment rates were appropriate in the absence of contrary evidence, while recognising that a judge was not compelled to use them.

The practical point for Interest on Unpaid Debts is that a proposed alternative rate or reduction for delay should have a reasoned basis. A debtor’s preference for a lower figure is not evidence of an appropriate commercial rate. Nor does every adjournment justify removing that period from an interest calculation.

What rates apply to Interest on Unpaid Debts in Queensland?

The Queensland Courts interest-rate tables distinguish registrar default judgments from discretionary awards by judges and interest after money orders. That distinction should survive into the demand, pleading and calculation.

The relevant directions are Supreme Court Practice Direction 7 of 2013, District Court Practice Direction 6 of 2013 and Magistrates Court Practice Direction 15 of 2013.

The default-judgment benchmark uses the relevant cash rate plus four percentage points; the judgment-debt rate uses the cash rate plus six. They are set for half-year periods, rather than changing with every cash-rate movement during the period.

Rates checked against the Queensland Courts tables on 5 October 2026. These are statutory rates, not a replacement for an enforceable contractual rate. A judge’s award under section 58 remains discretionary.

For Interest on Unpaid Debts spanning several periods, split the calculation at the relevant rate changes. Applying today’s rate to the whole of an older debt produces a different figure from applying the historical rates correctly.

Worked example — an invoice without an interest clause

Assume a business owes $30,000, there is no enforceable interest term and the creditor properly seeks statutory interest. For illustration, the relevant unpaid period consists of 181 days in January–June 2026 and 92 days in July–September 2026. Using the published default-judgment rates and a 365-day simple-interest basis:

• First period: $30,000 × 7.60% × 181 ÷ 365 = $1,130.63.
• Second period: $30,000 × 8.35% × 92 ÷ 365 = $631.40.
• Total: $1,762.03, rounding each period to cents.

The calculation assumes the debt stayed unchanged and those are the correct interest-bearing days. It illustrates the rate split; it does not establish the entitlement or replace the court’s discretion. If the claim proceeds to a contested hearing, the creditor still needs to justify the interest sought.

Pleading Interest on Unpaid Debts under the UCPR

A statement of claim should make the interest claim intelligible without requiring the defendant to reverse-engineer the ledger. Rule 159(3) of the Uniform Civil Procedure Rules 1999 (Qld) requires particulars of the amounts, rates, starting days and calculation method. Rule 159(4) allows the rate particulars to be supplied by reference to a practice direction.

For contractual interest, plead the agreement, the relevant clause, its operation and the facts triggering liability. For statutory interest, identify section 58, the relevant amount and period, and the basis on which the rate is sought. Where the claims are alternatives, make that explicit; rule 154(1) deals with alternative allegations or claims.

The details matter even when no defence is expected. Our guide to pleading damages, interest and relief in Queensland addresses how to express the relief and supporting particulars.

There is a specific consequence for an inadequately stated period: under rule 283(9), if the period is not specified in the statement of claim, interest under that default-judgment rule is recoverable only from issue of the claim. For a long-overdue account, that omission can be expensive.

Default judgment and payment during proceedings

Rule 283(2) and (4) provide the framework for interest on a debt or liquidated demand when judgment is sought by default. Contractual calculations and statutory calculations are addressed differently. Do not treat the prescribed statutory benchmark as a cap on every agreed contractual rate.

For statutory interest, rule 283(7)–(8) deals with accepting the prescribed rate or asking the court to determine a higher rate. It also addresses interest where the defendant has paid the principal after proceedings began. Payment of the debt during the case does not necessarily dispose of the outstanding interest claim.

Interest on Unpaid Debts does not dispense with the requirements for obtaining judgment. Rule 282 requires proof of service. The broader procedure is explained in our guide to default judgment where no defence has been filed.

Where a defence has been filed, a different procedural route may be required. Our article on summary judgment in debt recovery explains the test for obtaining judgment without a trial. An interest calculation cannot cure a genuine dispute about whether the underlying debt is owed.

Interest on Unpaid Debts after judgment

Interest ordinarily runs from the money order date

Section 59(1)–(3) supplies the statutory basis, subject to the court ordering otherwise. Read the actual order before calculating. The judgment debt may include the principal and pre-judgment interest incorporated into the judgment; it is no longer just the original invoice balance.

Keep pre-judgment interest and post-judgment interest separate. The prohibition on interest on interest in section 58 should not be used to strip pre-judgment interest out of a money order when determining its judgment balance. Equally, do not assume that accrued post-judgment interest should itself be capitalised periodically. Use the money order, applicable law and an auditable running balance.

Our guide to choosing an enforcement method for a Queensland money order discusses the next stage. Before enforcement, reconcile the order, payments, recoverable costs and interest through the relevant date.

The 21-day exception is not a general grace period for debts

Section 59(4)(a) deals with stated amounts for damages or costs paid in full within 21 days after the order. Section 59(4)(b) separately deals with costs quantified after the order and paid within 21 days after ascertainment and becoming payable.

An ordinary debt judgment is not given a blanket 21-day interest-free period. This distinction matters where a debtor proposes to pay an invoice judgment three weeks later and assumes interest can be omitted. If the damages or costs exception does not apply, and the court has not ordered otherwise, the statutory starting point remains the money order date.

Nor is the exception simply a direction to start interest on day 22. If its full-payment conditions are not satisfied, the underlying rule must be applied from the proper starting date.

Checking the amount before demanding payment

An effective review of Interest on Unpaid Debts starts with the legal basis and ends with a reconciled figure. Confirm the principal, due dates, interest clause or statutory provision, relevant historical rates, payments and calculation method. Keep the documents supporting each assumption.

If the parties negotiate a settlement, state whether the agreed payment includes principal, interest and costs, and what happens if payment is late. A settlement described only as “payment of the debt” can leave an unnecessary dispute about whether interest was released.

For a debtor reviewing a demand, the useful questions are equally specific: where is the agreed clause, when did liability begin, why was that rate used, and have all credits been applied? Paying an undisputed principal does not necessarily settle a separate interest entitlement. Obtain clear settlement terms if the intention is to resolve the whole claim.

Interest on Unpaid Debts is worth getting right at the outset. The enforceable entitlement may be substantial, but it must survive scrutiny of the contract, the pleading and the calculation.