Debts and Statute of Limitations

Ever wanted to know the best way to secure a Loan to your children for purchase of their home?

Make sure that you have a formal Loan Agreement with conditions or a term for repayment and it is not just in writing and repayable on demand.

Have you ever wondered how long you can be chased for a debt or how long you have to recover your unpaid debts?

In most states in Australia, the limitation period for debts is for six (6) years, except in Northern Territory where it is for three (3) years. This means that the creditor can pursue the debt from six (6) years from the date of when:

  1. The debt became due and payable; or
  2. The last date a payment was made towards the debt; or
  3. The date the debtor acknowledged in writing that they owed the debt.

It is imperative that you get the calculations correct, as failure to establish the limitation period, may mean that you will be unable to successfully recover your debt and the debt will become statute-barred.

A statue-barred debt is when the debt becomes older than the limitation period in your State or Territory (being six (6) years in all states in Australia, except in Northern Territory where it is three (3) years). Therefore, a creditor will no longer have legal right of recovery for a statue-barred debt. However, if the debtor acknowledges the debt in writing, or makes any payments towards the debt, then this resets the clock on the six (6) year limitation period.


We recommend a formal Loan Deed and Mortgage registered on title to the property. That way, it is very clear the legal rights of enforcement should the child divorce or die and the property becomes part of a dispute. Call us today on 07 3839 7555 if you would like to discuss this further.