Credit Terms Agreement (Trade Credit) — Australia
This Credit Terms Agreement (the “Agreement”) is entered into on [Agreement Date] between:
[Supplier Name], [Supplier ABN/ACN], of [Supplier Address], [Supplier City], [Supplier State] [Supplier Postcode], Australia (the “Supplier”);
and
[Customer Name], [Customer ABN/ACN], of [Customer Address], [Customer City], [Customer State] [Customer Postcode], Australia (the “Customer”).
1. PURPOSE AND SCOPE
1.1 The Supplier agrees to supply goods and/or services to the Customer on trade credit terms as set out in this Agreement. This Agreement governs all credit transactions between the parties from the date of execution.
1.2 This Agreement is a business-to-business arrangement. The National Consumer Credit Protection Act 2009 (Cth) does not apply to this Agreement unless the Customer is a natural person acquiring goods or services wholly or predominantly for personal, domestic, or household purposes.
2. CREDIT LIMIT AND PAYMENT TERMS
2.1 Credit Limit. The Supplier grants the Customer a credit limit of AUD $[Credit Limit] (the “Credit Limit”). The Supplier may, at its absolute discretion, vary the Credit Limit by giving the Customer written notice.
2.2 Payment Terms. All invoices issued by the Supplier are due and payable within [Payment Terms] days of the invoice date (the “Due Date”), unless otherwise specified on the invoice.
2.3 Method of Payment. Payment must be made by bank transfer (EFT) to the Supplier’s nominated account, by cheque, or by such other method as the Supplier notifies in writing. Payment is not made until cleared funds are received by the Supplier.
2.4 Overdue Interest. If the Customer fails to pay any invoice by the Due Date, interest accrues on the overdue amount at the rate of [Overdue Interest Rate]% per annum, calculated daily from the Due Date until the date of actual payment.
2.5 Allocation of Payments. The Supplier may apply any payment received from the Customer against any outstanding invoice in whatever order the Supplier determines in its absolute discretion.
3. ORDERS, DELIVERY AND ACCEPTANCE
3.1 Orders placed by the Customer are subject to acceptance by the Supplier in writing or by delivery of the goods or commencement of services.
3.2 Risk in goods passes to the Customer upon delivery. Delivery is deemed to occur when the goods are received at the Customer’s nominated delivery address or made available for collection.
3.3 The Customer must inspect goods upon delivery and notify the Supplier in writing of any defect, shortage, or damage within 5 Business Days of delivery. Failure to notify within this period is deemed acceptance of the goods.
3.4 The Supplier’s liability for defective goods is limited, to the maximum extent permitted by law, to repair, replacement, or refund of the price of the defective goods.
4. DEFAULT AND SUSPENSION OF CREDIT
4.1 The Customer is in default under this Agreement if the Customer: (a) fails to pay any invoice by the Due Date; (b) exceeds the Credit Limit; (c) becomes insolvent, bankrupt, or enters into any arrangement with creditors; or (d) breaches any other term of this Agreement.
4.2 Upon default, the Supplier may, without notice: (a) suspend or withdraw the Customer’s credit facility; (b) require payment of all outstanding amounts immediately; (c) refuse to accept further orders; and (d) exercise any rights under clause 5 (Retention of Title) or any other rights available at law or equity.
4.3 The Customer must immediately notify the Supplier if any event of default occurs or is likely to occur.
5. GENERAL PROVISIONS
5.1 Governing Law. This Agreement is governed by the laws of [Governing State], Australia. The parties submit to the non-exclusive jurisdiction of the courts of [Governing State].
5.2 GST. All amounts in this Agreement are stated exclusive of GST. The Customer must pay GST in addition to the stated amount on receipt of a valid tax invoice.
5.3 Variation. The Supplier may vary these credit terms on 14 days’ written notice to the Customer. Continued purchases by the Customer after the notice period constitutes acceptance of the varied terms.
5.4 Entire Agreement. This Agreement constitutes the entire agreement between the parties relating to trade credit and supersedes any prior credit application, terms, or arrangement.
5.5 Severability. If any provision of this Agreement is void or unenforceable, it is severed and the remaining provisions remain in force.
5.6 Privacy. The Supplier may collect, use, and disclose the Customer’s and Personal Guarantor’s personal information for the purpose of assessing and managing credit risk, consistent with the Privacy Act 1988 (Cth) and the Australian Privacy Principles.
EXECUTED as an agreement on the date first written above.
SUPPLIER
Name: [Supplier Name]
ABN/ACN: [Supplier ABN/ACN]
CUSTOMER
Name: [Customer Name]
ABN/ACN: [Customer ABN/ACN]
PERSONAL GUARANTOR (if applicable)
Name: [Guarantor Full Name]
Position: [Guarantor Title]
Supplier
________________
Signature
Date: ________________
Customer
________________
Signature
Date: ________________
Personal Guarantor (if applicable)
________________
Signature
Date: ________________
What Is a Credit Terms Agreement (Trade Credit) — Australia?
A Credit Terms Agreement (Trade Credit) in Australia sets the terms on which credit or investment is provided, including amounts, conditions, and repayment or return, governed by the National Consumer Credit Protection Act 2009 (Cth).
A Credit Terms Agreement is a business-to-business (B2B) document. Unlike a consumer credit contract, it is not regulated by the National Consumer Credit Protection Act 2009 (Cth) or the National Credit Code, provided that the customer is a company or other legal entity and the goods or services are acquired for business purposes. This means the supplier is not required to hold an Australian Credit Licence and is not subject to mandatory responsible lending, disclosure, or hardship variation obligations.
In Australian trade and commercial practice, a Credit Terms Agreement typically includes several key protections for the supplier. A retention of title (ROT) clause confirms that the supplier retains ownership of goods supplied until payment is received in full. The ROT interest must be registered on the Personal Property Securities Register (PPSR) under the Personal Property Securities Act 2009 (Cth) to obtain priority over other creditors in the customer's insolvency. A personal guarantee clause requires a director or principal of the corporate customer to personally guarantee the company's payment obligations, providing the supplier with direct recourse against an individual if the company fails to pay. A debt collection costs clause requires the customer to bear the supplier's costs of recovery in the event of default.
Trade credit is one of the most important forms of short-term financing for Australian businesses. According to the Australian Bureau of Statistics, trade credit accounts for a significant proportion of business liabilities for Australian SMEs. A well-drafted Credit Terms Agreement reduces the supplier's credit risk, provides clarity on payment expectations, and gives the supplier enforceable legal remedies if the customer fails to pay.
The legal framework governing the Credit Terms Agreement (Trade Credit) — Australia in Australia draws on several key statutes and regulatory bodies. Under the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 1989, ASIC regulates financial products and services. The National Consumer Credit Protection Act 2009 (Cth) governs consumer lending. The Australian Taxation Office (ATO) applies stamp duty through state revenue offices. The Australian Financial Complaints Authority (AFCA) resolves consumer financial disputes. The Reserve Bank of Australia (RBA) sets monetary policy affecting interest rate obligations in financial agreements. Parties executing a Credit Terms Agreement (Trade Credit) — Australia in Australia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The National Consumer Credit Protection Act 2009 (Cth) sets the foundational requirements.
When Do You Need a Credit Terms Agreement (Trade Credit) — Australia?
An Australian Credit Terms Agreement is needed whenever a supplier extends trade credit to a commercial customer — that is, whenever the supplier supplies goods or services and allows the customer to pay at a later date rather than at the time of supply.
The following situations commonly require a Credit Terms Agreement.
Wholesalers and distributors supplying to retailers. Wholesalers and distributors who supply goods to retailers on account (allowing payment at month end or within 30 days) should have a Credit Terms Agreement in place for each customer. Without a written agreement, the terms on which credit is extended may be unclear or disputed.
Manufacturers supplying to businesses. Manufacturers who supply raw materials, components, or finished goods to other businesses on trade credit terms should use a Credit Terms Agreement to define the credit limit, payment terms, and ROT arrangements.
Construction and building suppliers. Suppliers of building materials, hardware, and equipment to builders and contractors frequently extend credit. The Credit Terms Agreement should include PPSR-registered ROT provisions and a personal guarantee from the company's director.
Service providers billing in arrears. Service businesses — such as IT firms, professional services practices, and maintenance contractors — that issue monthly invoices for ongoing services should have a Credit Terms Agreement specifying the payment period and overdue interest rate.
Starting a new commercial relationship. When a supplier is about to commence a new commercial relationship with a corporate customer, a Credit Terms Agreement establishes the credit terms from the outset and confirms both parties understand their rights and obligations.
Replacing informal credit arrangements. Many small businesses extend credit informally without a written agreement, relying on a handshake or email exchange. A Credit Terms Agreement formalises the arrangement and provides the supplier with legally enforceable rights.
What to Include in Your Credit Terms Agreement (Trade Credit) — Australia
A well-drafted Australian Credit Terms Agreement should contain the following key provisions.
Parties and date. The agreement must identify the supplier and the customer with full legal names, ABNs or ACNs, and addresses. The date of the agreement should be stated.
Credit limit. The agreement should specify the maximum credit limit — the maximum aggregate amount the customer may have outstanding at any one time — and the supplier's right to vary the limit on notice.
Payment terms. The agreement must state the payment period (e.g., 30, 60, or 90 days from invoice date) and the method of payment. The payment terms clause should also address the allocation of payments against multiple outstanding invoices.
Overdue interest. The rate of interest on overdue amounts should be clearly stated. The rate should be a genuine pre-estimate of the supplier's financing costs and not a penalty. The interest commencement date (the due date) and the accrual method (daily, monthly compound) should be specified.
Retention of title. The ROT clause should state that title to all goods supplied remains with the supplier until all amounts owing to the supplier are paid in full, and that the customer holds the goods as bailee until payment. The PPSA provisions should confirm the supplier's right to register on the PPSR and the customer's obligations to support registration.
Personal guarantee. Where a director's personal guarantee is required, the guarantee clause should be clearly identified and signed separately by the guarantor. It should be unlimited, continuing, and unaffected by variation of the principal agreement.
Orders, delivery, and acceptance. The agreement should set out how orders are placed and accepted, when delivery is deemed to occur, the time limit for notifying the supplier of defects, and the supplier's limited liability for defective goods.
Debt collection costs. The agreement should expressly provide that the customer bears all costs of recovery (including collection agency commission, legal fees on a full indemnity basis, and court costs) in the event of default.
GST. The agreement should confirm that all prices are stated exclusive of GST and that GST is payable in addition to stated amounts on receipt of a valid tax invoice.
Privacy. Where the supplier collects personal information about the customer's directors, the agreement should include a short privacy disclosure consistent with the Privacy Act 1988 (Cth) and the Australian Privacy Principles.
Additional compliance elements for a Credit Terms Agreement (Trade Credit) — Australia used in Australia include: Under the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 1989, ASIC regulates financial products and services. The National Consumer Credit Protection Act 2009 (Cth) governs consumer lending. The Australian Taxation Office (ATO) applies stamp duty through state revenue offices. The Australian Financial Complaints Authority (AFCA) resolves consumer financial disputes. The Reserve Bank of Australia (RBA) sets monetary policy affecting interest rate obligations in financial agreements. Forms-legal.com provides this template as a starting point for Australia-compliant documentation.
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author = {{Forms Legal}},
title = {Credit Terms Agreement (Trade Credit) — Australia (Australia)},
year = {2026},
howpublished = {\url{https://forms-legal.com/australia/financial/agreements/credit-terms-agreement-australia}},
note = {Free legal document template. Based on National Consumer Credit Protection Act 2009 (Cth)}
}Frequently Asked Questions
A trade credit agreement (also called a credit terms agreement or credit application and terms of trade) is a contract between a supplier and a commercial customer that sets out the terms on which the supplier will extend credit — that is, supply goods or services and allow the customer to pay later. Trade credit is one of the most common forms of short-term business financing in Australia. Rather than requiring payment at the time of delivery, the supplier agrees to be paid within a specified period (typically 30, 60, or 90 days from the invoice date). A well-drafted credit terms agreement is important because it: (1) specifies the credit limit, ensuring the supplier does not extend more credit than it can afford to lose; (2) makes clear when payments are due and what interest applies if they are not paid on time; (3) includes a retention of title clause registered on the PPSR, giving the supplier a proprietary remedy (the right to recover the goods) if the customer defaults or becomes insolvent; (4) includes a personal guarantee from the company's director(s), providing direct recourse against individuals if the company fails to pay; and (5) specifies that the customer bears the cost of debt collection and legal proceedings if the supplier needs to enforce the agreement.
Interest on overdue invoices is enforceable in Australia if it is: (1) clearly specified in the credit terms agreement at the time the parties enter into the agreement; (2) a genuine pre-estimate of the creditor's loss from late payment (rather than a penalty disproportionate to the loss suffered); and (3) not prohibited by any applicable statute. For business-to-business credit, there is no statutory cap on the interest rate for overdue trade credit (unlike regulated consumer credit under the National Credit Code). However, a provision that charges an excessive or punitive interest rate on default may be characterised as a penalty clause and be unenforceable. established standards is to set the default interest rate at a commercially reasonable level — typically between 8% and 15% per annum — and to make clear in the agreement that the rate applies from the due date until actual payment. Many Australian suppliers use the Reserve Bank of Australia's cash rate plus a margin (e.g., RBA cash rate + 8% per annum) to requires the rate remains commercially defensible over time.
A retention of title (ROT) clause in a credit terms agreement provides that the supplier retains legal ownership of goods supplied to the customer until the customer has paid all amounts owing to the supplier. This gives the supplier a proprietary remedy — the right to recover the goods — if the customer fails to pay. However, under the Personal Property Securities Act 2009 (Cth) (PPSA), a retention of title arrangement is characterised as a security interest rather than a true ownership interest. This means the supplier must register the security interest on the Personal Property Securities Register (PPSR) to protect its priority against the customer's other creditors and in the event of the customer's insolvency. If the supplier does not register, its security interest is unperfected, and under section 267 of the PPSA, an unperfected security interest vests in the grantor (the customer) upon insolvency. This means the supplier's right to recover the goods is lost, and the supplier ranks as an unsecured creditor in the insolvency. For goods sold on credit under a credit terms agreement, the supplier's ROT interest is a purchase money security interest (PMSI) and has super-priority over other security interests if registered within 15 Business Days of delivery.
No — the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) and the National Credit Code (Schedule 1) apply only to credit contracts where: (1) the credit provider is in the business of providing credit; (2) a charge is made for the credit; (3) the debtor is a natural person or a strata corporation; and (4) the credit is provided wholly or predominantly for personal, domestic, or household purposes. A standard business-to-business trade credit agreement — where both the supplier and the customer are companies, and the goods or services are purchased for business purposes — is not regulated credit under the NCCP Act. The supplier does not need an Australian Credit Licence to extend business credit and is not subject to the mandatory disclosure, responsible lending, and hardship variation obligations that apply to regulated consumer credit. However, if a sole trader or individual purchases goods primarily for personal use under a credit terms agreement, the NCCP Act may apply and the agreement must comply with the Credit Code's requirements.
A personal guarantee in a credit terms agreement is a common risk-mitigation tool that requires a director or other individual associated with the corporate customer to personally guarantee the company's payment obligations to the supplier. The key considerations for a valid and enforceable personal guarantee in a credit terms agreement include: (1) the guarantee must be in writing and signed by the guarantor; (2) the guarantee should be an unlimited continuing guarantee covering all present and future obligations of the customer, to avoid arguments that the guarantee only covers obligations arising under specific orders; (3) the guarantor should acknowledge that they have had the opportunity to obtain independent legal advice before signing; (4) Australian courts may set aside a guarantee obtained by unconscionable conduct, misrepresentation, or undue influence — where a director is pressured to sign a guarantee without understanding its terms, the guarantee may be voidable; and (5) the credit terms agreement should expressly state that the guarantee is not affected by any variation of the credit terms or credit limit, to avoid the guarantee being discharged by variation of the principal agreement without the guarantor's consent.
Yes — a credit terms agreement may include a clause requiring the customer to pay the supplier's debt collection costs, legal fees (on a solicitor and own client basis), and disbursements if the supplier needs to engage a debt collection agency or solicitor to recover unpaid amounts. Australian courts have consistently upheld such clauses as enforceable indemnity clauses, provided they are clearly expressed in the agreement and were drawn to the customer's attention at the time of contracting. The clause typically provides that the customer must pay: (a) any commission charged by a debt collection agency (typically 15–25% of the amount recovered); (b) the supplier's solicitor's costs on a solicitor and own client (full indemnity) basis rather than the less generous party-party basis that would otherwise apply under court rules; and (c) court filing fees and other disbursements. The benefit of such a clause is that it incentivises timely payment and enables the supplier to recover the full cost of enforcement without bearing a significant gap between actual legal costs and the costs recoverable under standard party-party cost orders.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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