Independent Contractor Hasn’t Been Paid: Letter of Demand or Statutory Demand?

You finished the job. You sent the invoice. The client said they’d pay. Then nothing.

If you’re an independent contractor in Australia and you haven’t been paid, you have two main formal debt recovery tools: a letter of demand and a statutory demand. This guide explains which one to use and when.

Start with a letter of demand

A letter of demand is the first formal step in almost every unpaid invoice dispute. It works whether your client is an individual, a sole trader, a partnership, or a registered company.

A letter of demand:

• States the amount owed, the work completed, and the invoice date
• Cites the relevant contract law
• Gives the debtor a clear deadline to pay (typically 7 to 14 days)
• Warns of further action if payment is not received

Most contractors get paid within days of sending a properly drafted letter of demand. The debtor realises the matter will not go away.

When to use a statutory demand instead

A statutory demand is a more aggressive tool reserved for debts owed by registered companies only. It gives the company 21 days to pay or apply to set aside the demand. If they do neither, you can apply to wind up the company.

You can only use a statutory demand if:

• The debtor is a registered Pty Ltd or Ltd company (check the ASIC register)
• The debt is at least $4,000
• The debt is undisputed — the company has not raised a genuine dispute about the amount or the work
• The debt is a liquidated sum — a specific, ascertained amount

If your client is an individual, sole trader, or partnership, a statutory demand is not available. Use a letter of demand.

Why a letter of demand is almost always the right first step

Even if your client is a company and the debt exceeds $4,000, you should still send a letter of demand first unless you are certain the debt is undisputed and you are prepared to follow through with wind-up proceedings.

It’s faster. A letter of demand can be prepared and sent in under an hour. A statutory demand requires a supporting affidavit, must be served personally or by a process server, and involves strict compliance with the Corporations Act.

It’s cheaper. A letter of demand costs $97. A statutory demand costs $197, plus service fees if you use a process server.

It opens negotiation. A letter of demand signals you are serious but leaves room for the debtor to respond or propose a payment plan. A statutory demand is a formal threat of insolvency.

It avoids court if the debt is disputed. If the company genuinely disputes the debt, they can apply to set aside your statutory demand, and you may be ordered to pay their legal costs. A letter of demand does not carry that risk.

It works for individuals and companies. If you are not certain whether your client is a registered company, or if they operate through multiple entities, a letter of demand covers all bases.

When a statutory demand makes sense

A statutory demand is the right tool when:

• The debtor is a registered company
• The debt is $4,000 or more
• You have already sent a letter of demand and received no response or a refusal to pay
• The company has not disputed the debt in writing
• You are prepared to follow through with wind-up proceedings if the demand is not satisfied

A statutory demand is not a bluff. If the company does not pay within 21 days and does not apply to set it aside, you can file an application to wind up the company. That application typically costs $1,500 to $2,000 in filing fees, takes time, and may result in the company being placed into liquidation — which means you may still not get paid if there are no assets.

Use a statutory demand when you have exhausted other options and you are willing to escalate.

What happens after you send a letter of demand

Once your letter of demand is delivered, one of four things usually happens:

The debtor pays in full. This is the most common outcome. The letter demonstrates you are serious, and the debtor pays to avoid further action.

The debtor proposes a payment plan. If the debtor cannot pay the full amount immediately, they may offer to pay in instalments. You can accept, negotiate, or refuse.

The debtor disputes the debt. If the debtor claims the work was defective, incomplete, or not authorised, you may need to provide evidence or negotiate a reduced settlement. If the dispute is genuine, a statutory demand will not work.

The debtor ignores the letter. If the debtor does not respond within the deadline, you can escalate to a statutory demand (if the debtor is a company and the debt exceeds $4,000) or file in your state’s small claims tribunal or civil court.

What happens after you serve a statutory demand

A statutory demand must be served personally on the company or left at the company’s registered office. Once served, the company has 21 days to:

• Pay the debt in full
• Apply to the court to set aside the demand on the grounds that the debt is genuinely disputed, or that the company has an offsetting claim

If the company does neither, you can file an application to wind up the company. The application is filed in the Federal Court or the Supreme Court of your state.

If the court orders the company to be wound up, a liquidator is appointed to sell the company’s assets and distribute the proceeds to creditors. You may recover some or all of your debt — or nothing, if the company has no assets.

Common mistakes independent contractors make

Waiting too long to act. The longer you wait, the harder it becomes to recover the debt. Send a letter of demand as soon as the invoice is overdue.

Using a statutory demand when the debt is disputed. If the company has raised a genuine dispute about the work, the court will set aside the demand and may order you to pay the company’s legal costs.

Not keeping evidence. Always keep copies of the contract, the invoice, proof of delivery, and any correspondence with the client. You will need this evidence if the matter escalates.

Threatening legal action you are not prepared to take. Do not send a letter of demand or a statutory demand unless you are willing to follow through. Empty threats damage your credibility.

What to do if the debtor is an individual or sole trader

If your client is an individual or sole trader (not a registered company), you cannot use a statutory demand. Your options are:

1. Send a letter of demand — Claim Done prepares and delivers it for $97
2. Negotiate a payment plan — if the debtor cannot pay in full, a structured plan may be better than nothing
3. File in your state’s tribunal — for debts under $10,000 to $25,000 (depending on the state), you can file in the small claims tribunal
4. File in the Magistrates Court — for larger debts, you may need to file in the civil jurisdiction

ClaimDone also prepares tribunal applications and payment plan agreements if you need to escalate or formalise a settlement.

How Claim Done helps independent contractors recover unpaid fees

ClaimDone prepares both letters of demand and statutory demands for independent contractors across Australia.

For a letter of demand:

1. Complete a 5-minute intake form about the unpaid invoice
2. Upload the invoice, contract, and any supporting evidence
3. ClaimDone’s Proprietary AI Engine drafts a letter citing the applicable law
4. The letter is delivered to the debtor automatically via email and registered post

Flat fee: $97. Done in 60 minutes.

For a statutory demand:

1. Complete an intake form about the debt and the company
2. Upload the invoice, contract, and proof the debt is undisputed
3. ClaimDone prepares the statutory demand form and a supporting affidavit template
4. You arrange service (personal service or process server required)

Flat fee: $197. Prepared in 60 minutes.

Both services are available Australia-wide. No subscription. No hourly billing. No hidden fees.

Get your letter of demand sent today

If you are an independent contractor and you haven’t been paid, start with a letter of demand. It works for individuals and companies, it costs $97, and it gets results.

ClaimDone’s Proprietary AI Engine drafts a professionally formatted letter citing the applicable Australian law and delivers it to the other party automatically.

If the debtor is a registered company, the debt exceeds $4,000, and you have already sent a letter of demand with no result, escalate to a statutory demand. Claim Done prepares the form and supporting affidavit template for $197.

Both services are completed in under an hour. No subscription required. Get your letter of demand prepared and sent automatically or prepare a statutory demand under the Corporations Act.

Frequently Asked Questions

Can I send a statutory demand to an individual or sole trader?

No. A statutory demand can only be served on a registered company (Pty Ltd or Ltd). If your client is an individual or sole trader, use a letter of demand instead.

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

If the company applies to set aside the statutory demand on the grounds that the debt is genuinely disputed, the court will likely set it aside and may order you to pay the company’s legal costs. Only use a statutory demand if the debt is undisputed.

How long does it take to get paid after sending a letter of demand?

Most debtors respond within 7 to 14 days. Some pay immediately, others propose a payment plan, and some ignore the letter. If there is no response, you can escalate to a statutory demand (if the debtor is a company) or file in the tribunal or court.

Do I need a lawyer to send a letter of demand or statutory demand?

No. Claim Done prepares both documents for a flat fee and delivers them automatically (for letters of demand) or provides the completed forms for you to arrange service (for statutory demands). You do not need a lawyer unless the matter becomes complex or goes to court.

What happens if the company ignores my statutory demand?

If the company does not pay or apply to set aside the demand within 21 days, you can file an application to wind up the company in the Federal Court or Supreme Court. The filing fee is typically $1,500 to $2,000, and the company may be placed into liquidation.