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Working out interest 

If you are claiming money, yo​u can claim interest up until the date you get judgment f​rom the court. This is called 'pre-judgment interest'. You​ can only claim pre-judgment interest from the defendant if the debt owed is $1,000 or more. 

Case study Case study – Charlie and Kylie

Last year Charlie lent $2,000 to his girlfriend's sister, Kylie. Kylie needed to pay a lot of fines so that she could get her drivers licence back. The agreement was that Kylie would pay the money back by Christmas, but now it is July and she still hasn't paid. Charlie has broken up with his girlfriend, and Kylie seems to be avoiding him. Charlie needs the money because he is starting a course soon and will only be working part time.

To work out the amount of interest you can claim, follow the steps in the guide below.​​

Icon: Page with numbered listWorking out interest - Step by step guide​​ 

Step 1: Work out the start and end dates

The start date is usually the date after the debt should have been repaid. The end date is the date when you filed the statement of claim.

Charlie claims Kylie owes him $2,000 and that she should have paid him by 25 December 2013. Charlie filed his statement of claim on 19 November 2014.
Start date: 26 December 2013
End date: 19 November 2014

Step 2: Find out the interest rate

There are two kinds of pre-judgment interest: 

  • ​If there was an agreement between you and the defendant about the payment of interest, use this interest rate. For example, a loan agreement where the borrower agreed to pay interest on the loan at a certain interest rate. You may need to provide evidence of how you worked out this rate of interest to the court. 
  • If there was no agreement about payment of interest, you can use the pre-judgment interest rate based on the court rules. You can find this on the Local Court website. The pre-judgment interest rates change from time to time, so more than one interest rate might apply to the period for which you are claiming interest. 

There was no agreement between Charlie and Kylie about interest. Charlie checks the Local Court website and finds the court pre-judgment interest rates for the period 26 December 2013 to 19 November 2014. There are two interest rates for this period: 
For the period 1 July 2013 – 31 December 2013, the interest rate was 6.75% per annum. This covers the period 26 December 2013 to 31 December 2013. 
For the period 1 January 2014 to 31 December 2014, the interest rate was 6.5% per annum. This covers the period 1 January 2014 to 19 November 2014.

Step 3: Work out the yearly amount of interest

You can work out the yearly amount of interest by multiplying the interest rate by the amount of your claim. If there is more than one interest rate for the period you are claiming interest, you need to do this for each interest rate. 

Charlie is owed $2,000 and he has two different interest rates. Charlie does these calculations to work out the yearly interest: 
6.75% x $2,000 = $135
6.5% x $2,000 = $130 

Step 4: Work out the daily amount of interest

You need to work out the daily amount of interest for each interest rate period. To do this, divide the yearly amount of interest by 365.

Handy hintYou may find your figure is a very large decimal number. You should always stop at two decimal points to reflect cents. If the third number is 0-4 you round the second number down and if it is 5-9 you round the second number up. 

Charlie does these calculations to work out the daily interest: 
$135 divided by 365 = 37c
$130 divided by 365 = 36c

Step 5: Work out the number of days

Count the number of days for each separate interest rate period you are claiming interest for.

There are two interest rates for the period Charlie is claiming interest, so he will have to count the number of days when the interest rate was 6.75% per annum and the number of days when the interest rate was 6.5% per annum. 
Charlie works out that: 
Between 26 December 2014 and 31 December 2014 = 6 days
Between 1 January 2014 and 19 November 2014 = 323 days 

Step 6: Calculate the interest owed to you

This is the final step. To calculate the amount of interest owed multiply the number of days for each period (step 5) by the daily amount of interest (step 4), and then add these different amounts. This will give you the total amount of interest owed to you. This is the amount that you write next to 'Interest' in the statement of claim form.

In Charlie's case, there were 6 days when the interest rate was 6.75 % per annum. The daily interest for this period is 37c per day.
There were 323 days when the interest rate was 6.5% per annum. The daily interest rate for this period is 36 c per day
6 days x 37c = $2.22
323 days x 36c = $116.28
The total amount of interest Charlie can claim in his statement of claim form is:
$2.22 + $116.28 = $118.50

Handy hintIf you win your case, you can also claim interest on the debt after judgment. This is called 'post judgment interest'. You can usually only claim this if the other party does not pay all of the judgment debt within 28 days of the date of judgment.