The 6-year rule — what it actually means
In NSW, the Limitation Act 1969 (NSW) sets a 6-year limitation period for most contract debts. If you don't start court proceedings within 6 years of the debt becoming due, a court can refuse to hear your claim.
The clock starts from when the payment was due — not when you invoiced. If your invoice said "payment due within 30 days" and they never paid, the 6-year clock started on Day 31.
| What "statute-barred" means | What it does NOT mean |
|---|---|
| You cannot start a court claim to enforce the debt | The debt disappears or is forgiven |
| A court may dismiss your claim if the debtor raises it as a defence | You cannot ask for payment informally |
| Your enforcement options through the legal system are closed | You cannot list it as a credit default (separate time limits apply) |
When does the 6-year clock start?
For most commercial invoices, the clock starts from the payment due date — not the invoice date. Examples:
- Invoice dated 1 Jan 2020, payment due 31 Jan 2020 → clock starts 1 Feb 2020 → limitation date is 1 Feb 2026
- Verbal agreement to pay by a certain date → clock starts the day after that date
- Ongoing retainer with monthly invoices → each unpaid invoice has its own 6-year clock from its own due date
When does the clock reset?
The 6-year clock resets completely in two situations:
1. Written acknowledgment
If the debtor acknowledges in writing that they owe the money, the limitation period restarts from that date. An email saying "I know I owe you $5,000, I'll sort it out next month" is enough — it doesn't need to be a formal letter.
2. Part payment
If the debtor makes any payment toward the debt — even a token $50 on a $10,000 invoice — the 6-year clock resets from the date of that payment.
Document all acknowledgments and part payments carefully. They can dramatically extend the enforceable period of your debt (Financial Rights Legal Centre).
What types of debts does the 6-year rule apply to?
The 6-year period applies to most contract debts in NSW, including:
- Unpaid commercial invoices (goods or services supplied)
- Unpaid rent (residential and commercial)
- Personal loans between individuals
- Dishonoured cheques
Different limits apply to:
- Judgement debts (court order already made) — 12 years in NSW
- Mortgage-secured debts — 12 years
What about other Australian states?
| State / Territory | Contract debt limit | Legislation |
|---|---|---|
| NSW | 6 years | Limitation Act 1969 (NSW) |
| Victoria | 6 years | Limitation of Actions Act 1958 (Vic) |
| Queensland | 6 years | Limitation of Actions Act 1974 (Qld) |
| Western Australia | 6 years | Limitation Act 2005 (WA) |
| South Australia | 6 years | Limitation of Actions Act 1936 (SA) |
| ACT | 6 years | Limitation Act 1985 (ACT) |
| Northern Territory | 6 years | Limitation Act 1981 (NT) |
| Tasmania | 6 years | Limitation Act 1974 (Tas) |
What the 2026 report adds — jurisdiction reset rules
Our 2026 Australian Debt Collection Report (Section 9) covers the legal framework in detail, including two points that the headline 6-year rule obscures.
Northern Territory is the outlier — 3 years, not 6
Under the Limitation Act 1981 (NT), most contract debts have a 3-year limitation period, not 6. NT is the only Australian jurisdiction with this shorter window. NT creditors have half the time of every other state and territory to commence proceedings. As a practical rule, treat 30 months from the due date as the deadline for action in the NT — not the more familiar 6-year window used in NSW, VIC, QLD, WA, SA, ACT, and TAS.
NSW and the ACT do not reset on part-payment after expiry
In most Australian jurisdictions (Victoria, Queensland, Western Australia, South Australia, Tasmania), part-payment or written acknowledgement by the debtor resets the limitation clock. But in NSW and the ACT, the clock does not reset once it has expired. The same applies in NT. If you have an NSW debt approaching the 6-year mark, a payment plan negotiation can restart the clock only if signed before the expiry date — after expiry, the debt is permanently time-barred regardless of any subsequent acknowledgement.
Court judgment enforcement is longer than the limitation period
Once you obtain a judgment, the enforcement window extends well beyond the underlying limitation period. The general rule is 12 years to enforce a judgment; in South Australia and Victoria, it is 15 years. A judgment obtained at year 5 of the original limitation period therefore extends your enforcement window to year 17 (or year 20 in SA/VIC) from the original due date. This is one of the strongest practical reasons to take action before the limitation clock expires — you convert a time-limited debt claim into a much longer-lived judgment claim.
Practical checklist — if you have an old debt in NSW
- Calculate the due date. When was the invoice due? That's day one of your 6-year clock.
- Check for acknowledgments or payments. Has the debtor ever responded in writing or made any payment? If yes, the clock may have reset.
- Check how long you have left. Use our statute of limitations checker.
- Send a letter of demand now. Even years into the window, a formal letter may prompt a written response — which resets the clock.
- If you have less than 6 months left: consult a lawyer immediately. Filing a court claim before the deadline is the only way to preserve your enforcement rights.
Can a debt collector chase a time-barred debt?
Asking for payment is not prohibited. But commencing court proceedings on a time-barred debt is not allowed, and threatening to do so when you know the debt is statute-barred may breach ASIC's debt collection guidance and the Australian Consumer Law. See ASIC's enforcement outcomes at asic.gov.au/enforcement-outcomes.
The bottom line
NSW's 6-year limitation period is a hard deadline for court enforcement. The good news: acknowledgment and part payment reset the clock. The bad news: most business owners don't know the deadline is ticking until it's too late.
Sources
- Limitation Act 1969 (NSW) — legislation.nsw.gov.au
- Financial Rights Legal Centre — Debt fact sheets — financialrights.org.au
- ASIC — Debt collection enforcement outcomes — asic.gov.au/enforcement-outcomes