Is a promissory note different from a loan agreement?

Yes. A promissory note is a one-way promise to pay, usually simpler and negotiable. A loan agreement is a full contract with mutual obligations — including warranties, representations, and events of default — that is not negotiable. Both can document the same debt, but a loan agreement is more comprehensive.

Can a promissory note be transferred?

Yes, if it is "payable to order" (negotiable). Endorsement and delivery transfer the holder's rights. A note "payable to [specified person] only" or marked "not negotiable" cannot be freely transferred.

What happens if the maker doesn't pay?

The holder can sue in the state court with jurisdiction over the amount in dispute. Default interest may accrue, and the Local/Magistrates Court (up to around $100,000), District Court (mid-range), or Supreme Court (higher value) are typical forums. The note is strong evidence of the debt.

Does a promissory note need to be witnessed?

Witnessing is not a statutory requirement for the validity of a promissory note under the Bills of Exchange Act. However, witnessing adds evidential weight, particularly for informal private transactions, and may be required by third parties.

Can I charge interest on a promissory note?

Yes. The note can specify any reasonable interest rate. In the absence of an express rate, interest is payable from the date of presentment under section 62 (applied via section 95).

Is a promissory note subject to stamp duty?

Not in most Australian states. Stamp duty on promissory notes has been progressively abolished. Check the current duties legislation of the relevant state if duty treatment is material.

What is the difference between "on demand" and "fixed date"?

"On demand" means payable as soon as the holder presents the note. A "fixed date" note is payable only on the specified maturity date. Most private notes are payable on demand.

Can I use this for a consumer loan?

Only outside the NCCP Act regime. If you are lending to a consumer for personal, domestic, or household purposes and carrying on a business of lending, you will need an Australian Credit Licence and must comply with the National Credit Code.

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Promissory Note Template

A promissory note is an unconditional written promise to pay a specific sum of money to a named person, either on demand or at a fixed future date. Use our free Australian template to create a valid promissory note under the Bills of Exchange Act 1909 (Cth) — a portable, negotiable form of debt recognition that is simpler than a loan agreement.

Create Your Promissory Note

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PROMISSORY NOTE

State Of Victoria, Australia

LENDER (PAYEE)

Robert C. Patterson

12 Harbourside Drive, Sydney NSW 2000

BORROWER (MAKER)

Michael T. Chen

88 Chapel Street, Melbourne VIC 3000

Principal: 15,000.00 AUD

Interest: 5% p.a. (Simple) · Unsecured

FOR VALUE RECEIVED, Michael T. Chen (the "Borrower" or "Maker") promises to pay to the order of Robert C. Patterson (the "Lender" or "Payee"), the principal sum of 15,000.00 AUD, together with interest as described herein, in lawful money of Australia. Where applicable to consumer credit, this Note is subject to the National Consumer Credit Protection Act 2009 (Cth), Schedule 1 (National Credit Code).

PRINCIPAL AND INTEREST

The Borrower shall pay to the Lender the principal sum of 15,000.00 AUD. Interest shall accrue on the outstanding principal balance at the rate of 5% p.a., calculated on a simple interest basis. Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed.

LOAN DATE AND MATURITY

This Promissory Note is made effective as of 25 April 2026 (the "Loan Date"). The entire outstanding principal balance, together with all accrued and unpaid interest, shall be due and payable in full on 30 June 2027 (the "Maturity Date").

UNSECURED OBLIGATION

This Promissory Note is an unsecured obligation of the Borrower. No collateral or security has been pledged in connection with this Note. The Lender's sole recourse shall be against the general assets of the Borrower.

REPAYMENT SCHEDULE

The Borrower shall make monthly payments of 750.00 AUD each, commencing on 31 May 2026 and continuing on the same day of each subsequent month until the Maturity Date, at which time all remaining principal and accrued interest shall be due and payable in full.

PREPAYMENT

The Borrower may prepay this Note in whole or in part at any time without premium or penalty. Any prepayment shall be applied first to accrued and unpaid interest and then to the outstanding principal balance.

DEFAULT AND LATE FEES

The Borrower shall be in default under this Note if: (a) the Borrower fails to make any payment when due and such failure continues for a period of 10 days after the due date; (b) the Borrower becomes insolvent, is subject to a deed of company arrangement, or becomes subject to proceedings under the Corporations Act 2001 (Cth) or the Bankruptcy Act 1966 (Cth); or (c) any representation made by the Borrower in connection with this Note proves to have been materially false or misleading. Upon any late payment, the Borrower shall pay a late charge of 5% of the overdue amount.

ACCELERATION

Upon the occurrence of any event of default, the Lender may, at the Lender's sole option, declare the entire outstanding principal balance, together with all accrued and unpaid interest, immediately due and payable without further notice or demand. The Lender's failure to exercise this right upon any default shall not constitute a waiver of the right to exercise it upon any subsequent default.

COLLECTION COSTS

In the event of default, the Borrower shall pay all reasonable costs and expenses incurred by the Lender in collecting or attempting to collect amounts owing under this Note, including legal fees and disbursements on a full indemnity basis, court costs, enforcement costs, and other out-of-pocket expenses. This obligation shall survive repayment of this Note.

STAMP DUTY

The parties acknowledge that stamp duty may apply to this Promissory Note in certain Australian states and territories. In Queensland, stamp duty is imposed on promissory notes under the Duties Act 2001 (Qld). The Borrower is responsible for ascertaining and paying any stamp duty applicable to this Note in the relevant jurisdiction.

10.

GOVERNING LAW AND JURISDICTION

This Promissory Note shall be governed by and construed in accordance with the laws of the State of Victoria and, where applicable, the laws of the Commonwealth of Australia. The parties hereby submit to the exclusive jurisdiction of the courts of Victoria.

11.

GENERAL PROVISIONS

Waiver: No waiver by the Lender of any default shall operate as a waiver of any other default or the same default on a future occasion. Severability: If any provision of this Note is held unenforceable, the remaining provisions shall continue in full force and effect. Successors and Assigns: This Note shall be binding upon and inure to the benefit of the parties and their respective heirs, executors, administrators, successors, and permitted assigns. Amendment: This Note may not be amended except by written agreement signed by both parties. Electronic Execution: This Note may be signed electronically, which shall be valid and enforceable under the Electronic Transactions Act 1999 (Cth) and equivalent state legislation.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date first written above.

LENDER (PAYEE)

Robert C. Patterson

Date: ____________________

BORROWER (MAKER)

Michael T. Chen

Date: ____________________

What Is a Promissory Note?

A promissory note is a written, unconditional promise by one party (the "maker") to pay a specified sum of money to another party (the "payee") either on demand or at a fixed or determinable future time. Unlike a loan agreement, which is a full contract with mutual obligations, a promissory note is a one-way promise to pay and is negotiable — meaning it can be transferred to third parties.

Promissory notes are governed in Australia by Part IV of the Bills of Exchange Act 1909 (Cth), which largely codifies the UK Bills of Exchange Act 1882 in Australian law. Section 89 defines a promissory note as "an unconditional promise in writing made by one person to another signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money, to, or to the order of, a specified person or to bearer."

Promissory notes are used for private debts, seller finance, and short-term business funding. They are simpler and more portable than a full loan agreement, but less customisable. For most consumer lending, the NCCP Act regime applies; for business-to-business loans and private loans, the promissory note remains a useful instrument. Dishonour of a promissory note creates a right to sue for the amount plus interest under the Bills of Exchange Act.

What's Covered in This Template

Our promissory note template includes all the essential elements required by the Bills of Exchange Act 1909 (Cth).

Maker Details

Legal name, ABN (if any), and address of the person promising to pay.

Payee Details

Legal name and address of the person entitled to payment.

Principal Sum

Exact principal amount in Australian dollars.

Unconditional Promise

Express unconditional promise to pay.

Payment Date or On Demand

Fixed maturity date or payable on demand.

Interest Rate

Optional interest rate and compounding basis.

Place of Payment

Where payment is to be made.

Default Provisions

Acceleration and default interest on dishonour.

Prepayment

Right of maker to repay early without penalty, if any.

Negotiability

Whether the note is payable to order (negotiable) or not negotiable.

Governing Law

Choice of Australian state law governing the note.

Maker Signature and Witness

Signature block with optional witnessing.

How to Create a Promissory Note

Follow these steps to produce a valid Australian promissory note in minutes.

1
Enter Party Details
Provide the maker's and payee's legal names and addresses.
2
State the Principal Sum
Specify the exact amount and currency of the promise.
3
Set Payment Terms
Choose on demand or a fixed maturity date, and any interest rate.
4
Add Default Provisions
Include acceleration, default interest, and place of payment.
5
Sign and Download
The maker signs (optionally before a witness), and download the PDF.

Legal Considerations

Promissory notes are governed by the Bills of Exchange Act and create negotiable rights.

This template is for informational purposes only and does not constitute legal advice. For high-value notes or notes connected to consumer lending, obtain legal advice.

Reviewed for Australian law

Bills of Exchange Act 1909 (Cth)

Part IV (sections 89–100) of the Bills of Exchange Act 1909 (Cth) governs promissory notes. Section 89 defines the essential form; section 90 deals with inchoate notes; sections 92–95 cover the rights of makers, holders, and indorsers. Where the form meets the statutory requirements, the note is negotiable and the holder for value may sue the maker without proof of consideration.

NCCP Act and Consumer Lending

Where the note is given as security for or evidence of consumer credit regulated by the National Consumer Credit Protection Act 2009 (Cth), additional disclosure, licensing, and responsible lending obligations apply. Private notes and notes connected to business credit are generally outside the NCCP regime but may be subject to the ASIC Act unconscionability provisions and unfair contract terms law.

Presentment and Dishonour

A note payable on demand is payable immediately on presentment. A note payable at a fixed future date must be presented for payment on that date. Non-payment constitutes dishonour, triggering the holder's right to sue. Notice of dishonour is generally not required for the maker (section 93B), who remains liable on the note.

Stamp Duty and Tax

Promissory notes are no longer subject to stamp duty in most Australian states (abolished variously). Interest received on a note is assessable income to the payee under the Income Tax Assessment Act 1997 (Cth). Forgiven notes can have tax consequences for both parties.

Frequently Asked Questions

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