Penalty Interest Rate Victoria: How to Calculate Post-Judgment Interest

What Is the Penalty Interest Rate in Victoria?

The penalty interest rate in Victoria is fixed at 10% per annum under section 2 of the Penalty Interest Rates Act 1983 (Vic). It applies automatically to any registered judgment debt from the date the order was made — or the compliance date specified in the order — until the debt is paid in full. You do not need the court's permission to charge it, and the debtor does not need to agree.

This rate is set by the Victorian Attorney-General and published by gazette notice. Unlike commercial interest rates that fluctuate with the Reserve Bank, the penalty rate is a flat statutory rate that stays at 10% regardless of market conditions.

When Does Interest Start Running?

Interest begins accruing from the date the VCAT order takes effect — normally the date it is made, or a later date specified in the order. If the order sets a payment deadline, use the operative date stated in the order rather than assuming interest starts earlier.

For VCAT orders registered in the Magistrates' Court under section 121 of the VCAT Act 1998, registration does not restart the interest date. The applicable date remains the operative date of the original VCAT order.

How to Calculate Daily Interest

Victorian penalty interest is calculated on a simple daily basis. Compounding is prohibited unless the original order or underlying contract specifically authorises it.

The formula:

Interest = Principal × 0.10 × Days ÷ 365

For a $5,000 judgment debt that has been outstanding for 90 days:

$5,000 × 0.10 × 90 ÷ 365 = $123.29

For a $20,000 debt over 180 days:

$20,000 × 0.10 × 180 ÷ 365 = $986.30

Interest accrues on the outstanding principal balance. When the debtor makes a partial payment, the amount is allocated in a specific order before the principal reduces — which matters for the running calculation.

How Partial Payments Are Allocated

Victorian execution principles require that partial payments are allocated in this order:

1. Court and enforcement costs first — registration fees, warrant fees, process server costs
2. Accrued penalty interest second
3. Principal debt balance last

This means a partial payment does not reduce the interest-bearing principal until all costs and accumulated interest are covered. A debtor who pays $2,000 on a $10,000 debt with $400 in costs and $300 in accrued interest would see none of that $2,000 reach the principal until the $700 in costs and interest is cleared — leaving only $1,300 to reduce the principal to $8,700.

Keep a dated ledger every time you receive money. Record the payment amount, what it covers (costs, interest, principal), and the new outstanding balance. The court can ask to see this accounting at any enforcement hearing.

Interest Recovery Limits

You can recover accrued interest, but only for the six years immediately before you issue the enforcement process. If a judgment sat dormant for eight years and you then applied for a warrant, only the last six years of interest are recoverable.

The judgment itself remains enforceable for 15 years under the Limitation of Actions Act 1958 (Vic), but the interest recovery window is shorter.

The Penalty Interest Ledger in Practice

If you are enforcing a VCAT order through the Magistrates' Court, you will need to state the exact interest calculation in your Affidavit in Support when registering the order. The court registrar checks the arithmetic. An error — even an honest rounding mistake — can delay registration.

The VCAT Order Enforcement Guide includes a printable penalty interest ledger worksheet that tracks the running balance, partial payment allocations, and daily interest accrual across multiple transactions.

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