Can I Charge a Late Payment Fee?

You need a contractual right

Australia has no general statutory right to charge late fees or interest on overdue commercial invoices — unlike the United Kingdom, there is no law that grants it to you automatically. The right has to come from your contract instead: most reliably your terms of trade, but also a signed contract or an accepted quote that includes the clause. Without one of those, a late fee is simply not enforceable, no matter how reasonable it feels. This is general information, not legal advice.

The key point follows from that: the right must already exist before the invoice goes out. You cannot wait until a customer is late and then bolt on a fee they never agreed to — that is exactly the situation the law will not back. Putting the clause in place at the start of the relationship is what turns a late fee from a wish into something you can actually charge.

What counts as 'agreed'

Not every mention of a late fee carries the same legal weight. The stronger the evidence that the customer agreed to it before you supplied, the more enforceable it is.

Terms of trade

The strongest basis. A signed or accepted terms-of-trade document covers every transaction under it, so you only have to get agreement once.

Contract

A project-specific contract with a late-fee clause the customer has signed is solid, though it only covers that job.

Accepted quote

A quote or proposal that clearly states the late-fee terms and is accepted in writing is a valid contractual basis.

A late-fee line printed only on the invoice is the weakest option of all, because the customer did not necessarily agree to it before trading — they simply received it after the work was done, which is far easier for them to dispute.

Flat fee, interest, or both

There are two common kinds of late charge, and they do different jobs. A flat administration fee — for example, a set amount charged per reminder letter — covers the real admin cost of chasing an overdue account. Interest, by contrast, compensates you for being kept out of your money over time, the way any lender charges for the use of funds. Your terms can allow one or both, and many businesses use both together, as long as the terms say so clearly and make plain that they apply in addition to each other rather than as alternatives.

For how to size each of them without straying into territory that could be challenged, see how much late fee you can charge. Whatever combination you choose, it only works if it is set out in the terms the customer actually agreed to.

Put the right in place first

The practical sequence is simple, and the order is what matters. Include a late-fee clause in your terms of trade, get the customer to sign or accept those terms before you extend any credit, and then remind them of the clause on each invoice you issue. Done in that order, the fee is enforceable; done in reverse — deciding on a fee only once a payment is late — it is merely aspirational and unlikely to stick.

If a debt is already badly overdue and you never agreed a fee at the outset, trying to impose one now will usually not help. Your better lever at that stage is recovery of the principal, not penalties you cannot enforce. You can refer the debt to Merion on a commission-only basis and focus your energy on actually getting paid.