You did the work. You sent the invoice. The payment date has come and gone. Now your client refuses to pay or has gone silent.
For Australian small businesses, unpaid invoices threaten cash flow directly. You have clear legal options. The key is knowing which step to take, when to take it, and how much it will cost.
Step 1: Send a Polite Payment Reminder (Day 1-7 Overdue)
When to use it: The invoice is 1-7 days overdue, and this is the first time the client has been late.
What to do: Send a short, friendly email or text. Assume the best — they may have forgotten, or the invoice went to spam.
Example wording:
“Hi [Name], just a quick reminder that invoice #[number] for $[amount] was due on [date]. Let me know if you need me to resend it or if there are any questions. Thanks!”
Cost: Free.
Timing: Send it the day after the due date. If you hear nothing within 3-5 business days, escalate.
Why this works: Most late payments are administrative oversights. A polite nudge resolves the majority of overdue invoices without conflict.
Step 2: Send a Formal Overdue Notice (Day 7-14 Overdue)
When to use it: The polite reminder was ignored, or the client responded with vague excuses but still has not paid.
What to do: Send a formal email or letter stating:
- The invoice number, amount, and original due date
- That payment is now overdue
- A new deadline (typically 7 days from the date of the notice)
- That you will take further action if payment is not received
Example wording:
“This is a formal notice that invoice #[number] for $[amount], due on [date], remains unpaid. Payment is now [X] days overdue. Please arrange payment by [new date]. If payment is not received, I will escalate this matter.”
Cost: Free (or minimal if sent via registered post).
Timing: Send this 7-10 days after the polite reminder. Give them 7 days to respond.
Why this works: The shift in tone signals you are serious. Many clients pay at this stage to avoid formal action.
Step 3: Issue a Letter of Demand (Day 14-30 Overdue)
When to use it: The client has ignored your reminders, or they are disputing the invoice without valid grounds.
What it is: A letter of demand is a formal document that:
- States the debt owed
- Cites the applicable law
- Gives a final deadline (typically 7-14 days)
- Warns that you will commence tribunal or court proceedings if payment is not received
What to include:
- Invoice details (number, date, amount)
- Description of the work or goods supplied
- Payment terms from your contract or invoice
- Copies of the invoice, contract, and any prior correspondence
- A clear demand for payment by a specific date
- A statement that legal action will follow if the debt is not paid
Cost:
- DIY: Free, but you risk missing key elements
- Lawyer: $300-$800+ depending on complexity
- ClaimDone: $79 — AI drafts and sends the letter automatically based on your evidence
Timing: Send this 14-21 days overdue. Give them 7-14 days to pay before moving to the next step.
Why this works: A properly drafted letter of demand resolves a significant portion of unpaid invoices. It shows you know your rights and are willing to enforce them. Many clients pay immediately to avoid tribunal costs and a public record.
Step 4: File a Tribunal Application (Day 30-60 Overdue)
When to use it: The letter of demand was ignored, and the debt is under the tribunal limit in your state.
What it is: A tribunal application is a formal claim filed with your state’s civil tribunal. Tribunals are designed for small businesses and individuals to resolve disputes without needing a lawyer.
Tribunal limits by state:
- NSW (NCAT): Up to $30,000 (General Division)
- VIC (VCAT): Up to $100,000 (Civil Division)
- QLD (QCAT): Up to $25,000 (Minor Civil Disputes)
- WA (SAT): Up to $10,000 (Minor Cases)
- SA (SACAT): Up to $25,000 (Minor Civil)
- TAS (Magistrates Court): Up to $5,000 (Small Claims)
- ACT (ACAT): Up to $25,000 (General Division)
- NT (Local Court): Up to $25,000 (Small Claims)
What to include in your application:
- Completed tribunal application form
- Copy of your letter of demand
- Copy of the invoice(s)
- Copy of any contract or terms of service
- Evidence of the work completed (photos, delivery receipts, timesheets)
- Proof that the letter of demand was sent and received
Cost:
- Filing fee: $50-$300 depending on the claim amount and state
- Service fee: $50-$100 if the tribunal serves the documents for you
- Legal help (optional): $500-$2,000 if you hire a lawyer to draft the application
Timing: File within 30-60 days of the letter of demand being ignored. Most tribunals schedule hearings within 8-12 weeks.
Why this works: Once a tribunal application is filed, the matter becomes public record. Many clients settle before the hearing to avoid a judgment against them, which can affect their credit rating and business reputation.
Step 5: Enforce the Judgment (After Tribunal Hearing)
When to use it: You won at tribunal, but the client still refuses to pay.
What it is: A tribunal judgment gives you the legal right to enforce the debt. Enforcement options include:
- Garnishee order: Takes money directly from the debtor’s bank account
- Warrant of execution: Seizes and sells the debtor’s assets
- Instalment order: Forces the debtor to pay in regular instalments
- Examination notice: Requires the debtor to disclose their financial situation under oath
Cost:
- Garnishee order: $100-$200
- Warrant of execution: $200-$400
- Sheriff’s fees: Additional costs if the sheriff needs to attend the debtor’s premises
Timing: You can apply for enforcement as soon as the judgment is entered (typically 7-14 days after the hearing).
Why this works: Enforcement turns a tribunal judgment into real money. Most debtors pay once they realise enforcement is underway.
How Much Does Debt Recovery Cost?
Here is the full cost breakdown for each step:
| Step | Cost | Time Investment | |——|——|—————-| | Polite reminder | Free | 5 minutes | | Formal overdue notice | Free | 10 minutes | | Letter of demand (ClaimDone) | $79 | 10 minutes | | Tribunal application | $50-$300 filing fee | 2-4 hours | | Enforcement | $100-$400 | 1-2 hours |
Total cost to recover a $5,000 debt: $200-$750 if you do it yourself, or under $400 if you use ClaimDone for the letter and tribunal application.
When to Skip Straight to a Letter of Demand
You do not always need to start with polite reminders. Send a letter of demand immediately if:
- The client is avoiding contact or has blocked you
- The debt is large (over $2,000) and time-sensitive
- The client has a history of non-payment
- You have already sent multiple reminders without response
- The client is disputing the invoice in bad faith (e.g., claiming poor workmanship after accepting the work)
A letter of demand is standard business practice. It protects your legal position and starts the clock on formal debt recovery.
How ClaimDone Helps Australian Small Businesses Recover Unpaid Invoices
ClaimDone’s debt recovery tools are built for Australian small businesses. You do not need a lawyer. You do not need to understand legal jargon. You just need your invoice and evidence.
Letter of demand ($79): Upload your invoice and any supporting documents. The Proprietary AI Engine drafts a legally precise letter and sends it to the client automatically. Most clients pay within 7-14 days.
Tribunal application (flat fee): If the letter of demand is ignored, ClaimDone prepares your entire tribunal application pack — statement of claim, evidence summary, and supporting documents. You file it yourself and save thousands in legal costs.
No subscription. No hidden fees. Done in 60 minutes.
Start your letter of demand now and recover what you are owed.
Frequently Asked Questions
How long should I wait before sending a letter of demand in Australia?
There is no legal minimum waiting period, but best practice is to send at least one polite reminder and one formal overdue notice before issuing a letter of demand. If the client is avoiding contact or the debt is large, you can send a letter of demand immediately. Most businesses send a letter of demand 14-30 days after the invoice due date.
Can I charge interest on an overdue invoice in Australia?
Yes, but only if your contract or invoice terms explicitly state the interest rate and when it applies. Without a written agreement, you cannot charge interest. If your terms allow it, you can claim interest in your letter of demand and tribunal application. Default interest rates vary by state and contract type.
What happens if the client disputes the invoice after I send a letter of demand?
If the client raises a genuine dispute (e.g., claiming defective work or non-delivery), you may need to provide additional evidence or negotiate a resolution. If the dispute is in bad faith (e.g., they accepted the work and are now inventing reasons not to pay), document everything and proceed to tribunal. The tribunal will assess the evidence and decide who is right.
How much does it cost to take a client to tribunal in Australia?
Filing fees range from $50 to $300 depending on the claim amount and state. Service fees (if the tribunal serves the documents) add another $50-$100. If you hire a lawyer to draft the application, expect $500-$2,000. ClaimDone prepares the entire application pack for a flat fee, allowing you to file it yourself and save on legal costs.
What if the client has no money to pay the debt?
Winning a tribunal judgment does not guarantee payment. If the client has no assets or income, enforcement may not recover the full amount. Before filing a tribunal application, consider whether the client is genuinely insolvent or just avoiding payment. You can search the ASIC register to check if a company is in liquidation. If the debtor is an individual, an examination notice can reveal their financial situation.
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