Can you charge a late fee in Australia?

Yes. But only if the customer agreed to it before the job started. A late fee that shows up for the first time on an overdue invoice isn't enforceable, it's just a way to start an argument.

The one thing you must do first

Late fees and interest only stick if they were agreed up front. That means the term was in your quote or your terms when the customer said yes to the job. Add it after the fact and they can simply refuse to pay it, and they'd be right to.

So the whole game is one line of text, written once, sitting on every quote you send. Something like this:

Put the same line on the invoice too. Nobody should ever be surprised by it.

Flat fee or interest?

Two ways to do it. A flat fee is simple: one fixed amount once the invoice goes a set number of days overdue. Easy to explain, easy to add. Interest is a percentage that keeps ticking the longer they don't pay, which makes more sense on big invoices that could drag for months.

Either way, keep it modest. The fee is meant to cover the hassle of chasing, not punish anyone. A fee that looks like a penalty is the kind a tribunal can knock out, and a customer will fight. For most sole traders a small flat fee does the job.

Honestly? Chasing works better

Here's the quiet truth: the late fee's real job is to sit in your terms looking serious. Most overdue invoices get paid because you followed up early and politely, not because a fee kicked in. Slapping a fee on a decent customer who just forgot can cost you their next three jobs.

Use the fee as the backstop, not the opening move. Remind first. Fee later, if they've gone properly quiet. And if they still won't pay, the path is a letter of demand and then the tribunal - here's how that works.

Keep the paperwork straight

If you do charge the fee, add it as its own line on the invoice so the amount owing is clear, and keep copies of everything for 5 years like the ATO expects. A clean, valid invoice with agreed terms is what makes the fee stick.