Monetary policy and cash rates decisions are made by the Reserve Bank Board and released at 2.30 pm on the first Tuesday of each month. Coincidentally, the Melbourne Cup falls on the first Tuesday in November, and both can potentially cause pain to one’s hip pocket nerve.
Cash rate decisions impact on our family law clients also. Orders for the payment of money usually provide a time for payment and what happens if there is a default. Interest will usually be payable on the balance of the money that remains outstanding after default and if the order does not set an interest rate it is calculated in accordance with the Family Law Rules. These provide that:
- Interest is payable from the later of the date of the order or when the obligation to pay money takes effect.
- Interest is calculated in six-month periods: 1 January to 30 June; and 1 July to 31 December; and
- The rate of interest is 6% above the cash rate last published by the Reserve Bank prior to the commencement of the six-month period for which interest is being calculated.
Currently, the default interest rate is 6.85%. Unless the order specifies to the contrary, simple interest shall accrue, not compound.
When negotiating settlements clients should consider the contingencies in the event of default. Such contingencies might include a charge over property; or the enforced sale of real estate; default interest on unpaid money or a per centage of the equity in a property in lieu if markets are volatile; and ensuring they can meet their obligations before committing to orders. We can assist you when making these choices.
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