Interests on Late Payments
Calculation of Penalty Interest
The interest payable on late payments will be in accordance with existing Victorian legislation, namely, the Penalty Interest Rates Act 1983. Under this legislation, the penalty interest rate which would apply to the late payment of commercial debts by agencies would be the interest rate expressed as a percentage fixed by the Attorney-General from time to time by notice published in the Government Gazette.
Such penalty interest would accrue 30 days after the debt arises.
The current penalty interest rate is available from the Department of Justice website, and is also published in the ‘The Age’ newspaper each Monday under the Law List.
Example Penalty Interest Calculation
Assuming the following:
- the Penalty Interest rate is 12 percent
- the value of the invoice is $100,000
- the payment occurs twelve days after the conclusion of the 30 day period
- the interest owing = $ 100,000 × 12.00 percent × 12/365 = $ 394.52
Initiation of Penalty Payments
In respect of the ongoing administration of the commitment, the penalty interest component on late payments will be based on the supplier's initiation, which will minimise tracking of individual payments by departments.