What is Late Payment Interest

Introduction

The information in this page details the inclusion and exclusion criterial for Late Payment Interest (LPI)

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Late Payment Interest

Under SA Government payment policy (SA Legislation) all accounts are to be paid within 30 calendar days of receipt of invoice (depending on the invoiced amount), except where there is a dispute over the account.   Businesses are able to receive penalty interest payments from SA Government when the payment terms are not adhered to.  

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How do you calculate late payment interest?

To calculate the interest due on a late payment, the amount of the debt should be multiplied by the number of days for which the payment is late, multiplied by daily late payment interest rate in operation on the date the payment became overdue.  Refer to the Late Payment Interest Calculator.

The late payment interest amount must be calculated with the following formula: I = ND x (IA x PIR) / 365

Where:
 

  • I is the interest payable to the business
  • ND is equal to the number of days that the invoice is paid late (i.e. interest starts to apply from the 31st day after the Agency Invoice Received Date)
  • IA is the value of the invoice (GST exclusive)
  • PIR is the prescribed interest rate applying on the first day of the month in which the default period ends. The prescribed interest rate is the Reserve Bank Cash Rate for the applicable month plus 5%.
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Inclusion criteria - Invoiced amount

  • The invoice is valued at $1 million (GST exclusive) or less;

  • The amount of interest to be paid is $10 or more;

  • The invoice was issued by a business which is incorporated under the Corporations Act 2001 (Cwth);

  • The invoice relates to the provision of goods and or services to a Public Authority; and

  • The invoice is not disputed.

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What items are excluded

  • Invoices in a foreign currency;

  • Invoices that do not relate to the supply of goods and services;

  • Invoices which are a Refund (REFND);

  • Invoices which are a Concession (CONC) payment;

  • Invoices which are a Grant (GRANT) payment (unless they are specifically for the supply of goods and/or services.  For the purposes of this business requirement, a grant for goods and/or services will only be included if the associated invoice has a GST component); and

  • WorkCover payments made to employees or terminated employees;

Further the Act excludes invoices for the supply of goods and services where the associated contract:

  • Makes specific provision for payment terms that are greater than 30 days; or

  • Makes specific provision for the payment of interest if a payment is not made in accordance with the terms of the contract; or

  • A construction contract under the Building and Construction Industry Security of Payment Act 2009; or

  • A contract that does not include a monetary consideration; or

  • A contract of a class excluded from the ambit of this definition by the regulations.

Businesses not entitled to receive LPI are:

  • Other State Government Public Authorities;

  • Public schools;

  • Public universities;

  • Local Government, Commonwealth Government, or public entities in other State Government jurisdiction;

  • Public sector employees;

  • Carers (who are not businesses in accordance with the definition under the Act); and

  • Members of the public (unless they are directly providing goods or services to a public authority)

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