Preventing bad debts starts with robust commercial arrangements — clear payment terms, security interests where appropriate, and understanding your legal rights if a customer fails to pay. This page covers the key legal tools and resources available to Australian businesses for managing payment risk and commercial credit.

PPSR — Personal Property Securities Register

The Personal Property Securities Register (PPSR) is a national online register of security interests in personal property — that is, in property other than land. Businesses can register security interests in assets they supply on credit (such as goods sold on retention of title terms) or in assets of a debtor who has borrowed money. A registered security interest gives the secured party priority over unsecured creditors in the event of insolvency. Failure to register a security interest correctly can mean losing priority to other creditors.

ppsr.gov.au — Personal Property Securities Register: The Australian Government's PPSR — register a security interest, search the register, and access guidance on how the PPSR works.
PPSR — About personal property securities: Plain-language explanation of what personal property securities are, how they work, and why registration matters.

Retention of title (Romalpa) clauses

A retention of title (ROT) clause — sometimes called a Romalpa clause — is a contractual term under which the seller retains legal ownership of goods until the buyer has paid in full. Under the Personal Property Securities Act 2009 (Cth) (PPSA), a ROT arrangement is a security interest and must be registered on the PPSR to be effective against a buyer who goes into insolvency before paying. Without a valid PPSR registration, an unpaid seller with a ROT clause may be treated as an unsecured creditor.

Security Interests in Personal Property (PPSA)

The Personal Property Securities Act 2009 (Cth) — the PPSA — is the legislation that governs security interests in personal property in Australia. It unified a patchwork of state and territory laws into a single national framework. Key concepts under the PPSA include attachment (when a security interest becomes effective), perfection (registration on the PPSR), and priority rules (which secured party has priority over assets). Businesses that supply goods on credit, lend money against assets, or lease equipment should understand the PPSA's requirements.

PPSR — Legislation and policy: Links to the Personal Property Securities Act 2009 and related regulations, as well as PPSR policy guidance.

Security of Payment legislation (SOPA)

The Building and Construction Industry Security of Payment Act — known as SOPA — applies in each state and territory to give contractors, subcontractors and suppliers in the building and construction industry a faster mechanism for recovering payment. Under SOPA, a claimant can issue a payment claim, and if the respondent fails to respond or to pay, the claimant can have the amount adjudicated and recover it as a debt. SOPA operates separately from (and in addition to) the general court system. Each state has its own version of SOPA, though the core mechanism is similar across jurisdictions.

NSW Fair Trading — Security of Payment: Overview of SOPA in New South Wales — how to make a payment claim and what to do if a payment schedule is not issued or payment is not made.
Consumer Affairs Victoria — Security of Payment: Overview of Victoria's Security of Payment Act — rights and obligations for parties in the building and construction industry.
QBCC — Building Industry Fairness (QLD): Queensland's framework for ensuring contractors and subcontractors are paid promptly — project trust accounts and payment claims.

Payment Terms and the Prompt Payment Code

Standard commercial payment terms in Australia are typically 30, 60 or 90 days from invoice. The federal government's Supplier Payment Policy requires Commonwealth agencies to pay within five days of receiving a correct invoice for contracts under $1 million (check the current policy at the Department of Finance website). The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) advocates for shorter payment terms and supports the Payment Times Reporting Scheme, which requires large businesses to report on how quickly they pay small business suppliers.

ASBFEO — Payment times: ASBFEO's resources and advocacy on payment times for small businesses — including the Payment Times Reporting Scheme.
paymenttimes.gov.au — Payment Times Reporting Scheme: The federal register of large business payment time reports — check how large businesses are performing on small business payment times.

Trade credit insurance

Trade credit insurance is a specialist insurance product that protects businesses against the risk of non-payment by their customers. It covers insolvency, protracted default, and in some policies, political risk for export sales. Trade credit insurance is provided by specialist insurers operating through brokers. It is not an official government service, but it is an important commercial tool for businesses with significant credit exposure. If you are considering trade credit insurance, speak with a general insurance broker who specialises in this area.

Related Merion resources

Insolvency & Bankruptcy Resources — what happens to security interests when a debtor becomes insolvent.
Small Business Support — ASBFEO and state Small Business Commissioners.
Credit Control Academy — lessons on setting up robust credit policies and payment terms to reduce bad debts.
Merion's services — commission-only commercial debt recovery when payment terms have not been met.

Payment Terms & Commercial Law