Debt Recovery for Small Business: Statutory Demand vs Tribunal

Your invoice is overdue. The debtor is not responding. You need to choose between a tribunal application, a statutory demand, or a letter of demand.

This guide explains the three main debt recovery tools available to Australian small businesses, when each one applies, and how to choose based on debtor type and debt size.

The three debt recovery tools compared

Letter of demand — A formal written notice demanding payment within a set timeframe (typically 7–14 days). Applies to any debtor, any amount. Not legally enforceable on its own, but often prompts payment and serves as evidence if you escalate.

Statutory demand — A formal demand under the Corporations Act requiring a registered company to pay a debt of $4,000 or more within 21 days, or face presumption of insolvency. Only applies to companies, not individuals or sole traders.

Tribunal application — A claim filed in your state or territory’s small claims tribunal or court seeking a legally binding payment order. Applies to any debtor type, up to a limit that depends on the jurisdiction.

The right tool depends on who owes you, how much they owe, and whether you have already demanded payment.

When to use a statutory demand

A statutory demand creates immediate commercial pressure against a registered company and opens the door to wind-up proceedings if the debt remains unpaid.

Requirements for a valid statutory demand

You can serve a statutory demand if:

• The debtor is a registered company (Pty Ltd, Ltd) — check the ASIC register
• The debt is $4,000 or more
• The debt is a liquidated sum — a specific, ascertained amount
• The debt is undisputed — the company has not raised a genuine dispute about the amount or liability
• You can swear an affidavit verifying the debt

If the debtor is a sole trader, partnership, or individual, a statutory demand does not apply. Use a letter of demand followed by a tribunal application instead.

What happens after you serve a statutory demand

Once served, the company has 21 days to either:

1. Pay the debt in full
2. Apply to set aside the demand (on grounds of genuine dispute, offsetting claim, or defect)
3. Do nothing

If the company does nothing and does not pay, you can apply to wind up the company after the 21-day period expires. The company is presumed to be insolvent under the Corporations Act.

The reputational and operational consequences are severe.

When NOT to use a statutory demand

Do not serve a statutory demand if:

• The debt is genuinely disputed
• The debt is under $4,000
• The debtor is an individual, sole trader, or partnership
• You cannot prove the debt with documentary evidence

If any of these apply, use a letter of demand and tribunal application instead.

When to use a tribunal application

A tribunal application is the right tool for smaller debts, individual debtors, or any debt that does not meet the statutory demand criteria.

Tribunal and court limits by state

Each state and territory sends debt recovery claims to a tribunal or court, with these limits:

• New South Wales (Local Court of NSW): Small Claims up to $20,000; General Division over $20,000 up to $100,000
• Victoria (VCAT): Civil Claims List (goods and services disputes, including unpaid money)
• Queensland (QCAT): up to $25,000 (minor civil disputes); above that, the Magistrates Court
• South Australia (Magistrates Court of South Australia): minor civil action up to $12,000; general claims up to $100,000
• Western Australia (Magistrates Court of Western Australia): minor case claims up to $10,000; general procedure claims up to $75,000
• Tasmania (Magistrates Court of Tasmania, Civil Division): claims up to $50,000
• Australian Capital Territory (ACAT): civil disputes up to $25,000
• Northern Territory (NTCAT): small claims up to $25,000

If your debt exceeds the tribunal limit, you must file in the relevant Magistrates, District, or Supreme Court.

Who can be a respondent in a tribunal claim

Tribunals accept claims against:

• Individuals (including sole traders operating under their own name)
• Partnerships (name all partners as respondents)
• Companies (Pty Ltd, Ltd)
• Trusts (name the trustee as respondent)

Unlike statutory demands, tribunals do not require the debtor to be a registered company.

The tribunal process

1. File the application — complete the tribunal’s form, attach your evidence (invoices, contracts, correspondence), pay the filing fee (fees change each 1 July; check the current fee on the tribunal’s or court’s website before you file)
2. Service — the application is served on the respondent, who then has a set time to respond (in some jurisdictions, such as QCAT, you must serve it yourself)
3. Directions hearing — the tribunal may schedule a preliminary hearing to clarify issues
4. Final hearing — both parties present evidence, the tribunal member makes a binding decision
5. Enforcement — if you win and the debtor does not pay, you can enforce through garnishee, warrant, or bankruptcy

Tribunal hearings are less formal than court and do not require a lawyer; waiting times vary by tribunal.

When to start with a letter of demand

A letter of demand is not legally required before filing a tribunal application or serving a statutory demand, but it is standard commercial practice and often resolves the matter without formal proceedings.

A demand letter:

• Demonstrates that you have made a reasonable attempt to resolve the dispute
• Provides a clear deadline and consequences for non-payment
• Costs less than tribunal filing fees or statutory demand preparation
• Can be sent to any debtor type, for any amount

If they do not, the letter becomes evidence in your tribunal application or supports your statutory demand affidavit.

How to choose the right debt recovery tool

Is the debtor a registered company?

• Yes, and debt is $4,000 or more → Use a statutory demand
• Yes, but debt is under $4,000 → Use a letter of demand, then tribunal if unpaid
• No (individual or sole trader) → Use a letter of demand, then tribunal if unpaid

Has the debt been genuinely disputed?

• Yes → Do not use a statutory demand; use tribunal instead
• No → Proceed with statutory demand if company debt over $4,000, or tribunal for all other debts

Is the debt over the tribunal limit?

• Yes → File in Magistrates or District Court
• No → File in tribunal

How Claim Done helps with small business debt recovery

Claim Done prepares statutory demands, tribunal applications, and letters of demand based on the evidence you describe.

For statutory demands, Claim Done generates the Form 509H and supporting affidavit template, pre-filled with your debt details and the debtor’s company information. You swear the affidavit before a JP or solicitor, then serve it on the company. Fixed fee: $97.

For tribunal applications, Claim Done drafts the application document you file, a statement of claim, and a witness statement based on your invoices, contracts, and correspondence. You file the documents with your state tribunal or court.

For letters of demand, Claim Done drafts a professionally formatted demand letter and delivers it to the debtor by email.

All services are completed in about 5 minutes. No subscription, no hourly billing, no hidden fees.

Final steps: serve, file, or enforce

Once you have chosen the right debt recovery tool:

Statutory demand — serve Form 509H and affidavit on the company’s registered office (check ASIC register for address), wait 21 days, apply to wind up if unpaid

Tribunal application — file your application online or in person, pay the filing fee, attend the directions hearing and final hearing

Letter of demand — send via email and registered post, wait for the deadline, escalate to tribunal or statutory demand if unpaid

If the debtor still does not pay after a tribunal order, you can enforce through:

• Garnishee order (intercept wages or bank accounts)
• Warrant of execution (seize and sell assets)
• Bankruptcy notice (if debt over $10,000 against an individual)

Statutory demands are reserved for larger company debts where immediate commercial pressure is required.

Get your debt recovery documents prepared now

Claim Done prepares statutory demands, tribunal applications, and letters of demand for Australian small businesses. Tell us about your invoices and evidence, and your documents are ready in about 5 minutes. Choose the service that matches your debtor type and debt size.

Frequently Asked Questions

Can I serve a statutory demand on a sole trader?

No. Statutory demands only apply to registered companies (Pty Ltd, Ltd) under the Corporations Act. If the debtor is a sole trader or individual, use a letter of demand followed by a tribunal application instead.

What happens if the company disputes the debt after I serve a statutory demand?

The company can apply to set aside the statutory demand within 21 days if it can show a genuine dispute about the debt. If the court sets aside the demand, you cannot use it to wind up the company. You must then pursue the debt through tribunal or court proceedings.

Do I need a lawyer to file a tribunal application?

No. Tribunals are designed for self-represented parties. Claim Done prepares the application documents for you based on your evidence, and you file them directly with the tribunal.

How long does it take to recover a debt through tribunal?

If the respondent does not file a defence, you may be able to get a default judgment. Enforcement after judgment takes further time, depending on the debtor’s assets.

Can I use a statutory demand for a debt under $4,000?

No. The Corporations Act sets a minimum threshold of $4,000 for statutory demands. If your debt is under $4,000, use a letter of demand followed by a tribunal application if the debtor does not pay.