Lay-by Payment Calculator

How lay-by works in Australia

Lay-by is a traditional Australian payment method where a customer pays for goods in installments before taking possession. Unlike buy-now-pay-later (BNPL) services such as Afterpay or Zip, the retailer holds the goods until the final payment is made. This means there is no credit involved - the customer is simply pre-paying over time, and the retailer bears no credit risk.

Under Australian Consumer Law, lay-by agreements must be in writing and include the total price, deposit amount, installment schedule, and any fees or charges. If the customer cancels, the retailer may only charge a reasonable cancellation fee to cover their costs - they cannot keep the entire deposit. The balance must be refunded within a reasonable time.

How to use this lay-by payment calculator

1. Enter the total price of the item (GST-inclusive) and the deposit percentage or fixed deposit amount required upfront.
2. Select the number of installments and the payment frequency (weekly, fortnightly, or monthly).
3. Add any administration or service fees the retailer charges for the lay-by arrangement.
4. Review the full payment schedule showing each installment date and amount, plus the total cost including fees.

Australian Consumer Law rules for lay-by agreements

The ACL sets specific requirements for lay-by agreements in Australia. The agreement must be in writing and state the total price, deposit, installment amounts, and any fees. If the retailer cancels the lay-by (e.g. the item is no longer available), the customer is entitled to a full refund of all payments made, with no deductions. If the customer cancels, the retailer can only deduct costs directly incurred - not a flat penalty. The ACCC has taken enforcement action against retailers charging excessive cancellation fees. From a GST perspective, the ATO treats the supply as occurring when the lay-by agreement is made, so the retailer must report the full GST in the BAS period the lay-by is created, not when the final payment is received. This creates a timing difference that must be managed carefully in the retailer's cashflow.

Lay-by vs BNPL: accounting differences

With BNPL services, the retailer receives the full payment upfront (minus a merchant fee of 3-6%) and the BNPL provider assumes the credit risk. Lay-by payments sit as a liability on the retailer's balance sheet until the goods are delivered, tying up stock without generating immediate revenue. For retailers, the choice between offering lay-by and partnering with a BNPL provider comes down to margin impact versus cash flow timing. Lay-by preserves full margin but delays cash; BNPL accelerates cash but reduces margin by the merchant fee.

Managing lay-by payments with automated accounts payable

Retailers offering lay-by need to track partial payments, match them to specific agreements, and reconcile the liability account accurately. When supplier invoices for the lay-by stock are processed manually, there is a risk of mismatching costs to revenue. AP automation ensures every supplier invoice is captured and coded correctly, making it easier to track the true cost of goods held on lay-by and maintain accurate financial reporting.