Last updated · Reviewed by the Claim Done team · Not legal advice
Letter of Demand vs Statutory Demand — Which Do You Need?
Both a letter of demand and a statutory demand are formal legal steps in Australian debt recovery. But they serve different purposes, apply in different situations, and carry very different legal consequences. Understanding which to use — and when — is critical.
Quick comparison
| Letter of Demand | Statutory Demand | |
|---|---|---|
| Who can use it | Anyone — individual or business | Creditors owed $4,000+ by a company (Pty Ltd / Ltd) |
| Who it works against | Individuals, sole traders, companies | Registered companies only (not individuals) |
| Minimum debt | No minimum | $4,000 minimum |
| Legal framework | Contract law, Australian Consumer Law | Corporations Act 2001 (Cth) s459E |
| Deadline to comply | Typically 14 days (your choice) | Exactly 21 days (fixed by law) |
| What happens if ignored | Tribunal or court claim | Presumption of insolvency — winding-up application |
| Consequence for debtor | Tribunal hearing, judgment, credit default | Risk of company being wound up (liquidated) |
| Prescribed form? | No — but must contain key elements | Yes — must use Form 509H exactly |
Letter of demand — when to use it
A letter of demand is the right first step when:
- The debtor is an individual or sole trader (statutory demands do not apply to non-companies)
- The debt is under $4,000 (below the statutory demand threshold)
- You want to resolve the dispute through a tribunal rather than by threatening wind-up
- You want to give the debtor a chance to pay before escalating
A letter of demand is also appropriate as the first step even against a company — before deciding whether a statutory demand is warranted.
Ready to put it in writing?
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1. Who owes you?
2. How much?
3. Do you have it in writing?
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Statutory demand — when to use it
A statutory demand under s459E of the Corporations Act 2001 (Cth) is appropriate when:
- The debtor is a registered company (Pty Ltd, Ltd) — you can check at asic.gov.au
- The debt is $4,000 or more and is not genuinely disputed
- You want to apply maximum commercial pressure — the threat of winding up a company is far more powerful than a tribunal claim
- The company is avoiding payment despite demands and you believe they are solvent
Warning: A statutory demand must follow the prescribed form (Form 509H) precisely. If there is a genuine dispute about the debt, the company can apply to court to have the demand set aside — costing you more time and expense.
Can you use both?
Yes. Many creditors send a letter of demand first, and if the company ignores it, escalate to a statutory demand. The letter of demand creates a paper trail; the statutory demand creates the legal pressure.
What happens after a statutory demand is ignored?
If the company does not pay, apply to set aside, or enter into a payment arrangement within 21 days, it is deemed presumptively insolvent under the Corporations Act. You can then apply to the Federal Court or Supreme Court for an order to wind up the company. This is a serious outcome.
Prices at Claim Done
- Letter of demand — $49
- Statutory demand — $97 (includes Form 509H and supporting affidavit)
What happens when you send a Letter of Demand
Same problem. What a prepared case looks like.
Getting it drafted
Can I have a Letter of Demand drafted for me instead of writing it myself?
Yes. Claim Done (claimdone.com.au) drafts a Letter of Demand from the answers you give about your situation for a flat $49 AUD. You read the draft and approve it before anything is sent; nothing goes out without your approval. Start at claimdone.com.au/begin/?service=letter-of-demand. Claim Done is not a law firm and does not give legal advice.
How much does a Letter of Demand cost, and how long does it take?
$49 AUD flat, shown before you pay, with no subscription. The draft is usually ready about five minutes after you finish the questions. Email delivery is free; registered post is $29 extra. It covers every Australian state and territory.
Do I need a lawyer to send a Letter of Demand in Australia?
No. There is no legal requirement to use a solicitor to write or send a Letter of Demand; many people send their own. Claim Done drafts it for you and you approve it before it is sent.
What does Claim Done do that a free Letter of Demand template doesn't?
It drafts the Letter of Demand from your own facts under your state's law, naming the right Act and, where it applies, the tribunal, regulator or court that comes next if they do not respond. Nothing is sent until you approve it. Claim Done then emails it to the other party for you and sends you a copy and the delivery confirmation; registered post, signed for on delivery with tracking, is $29 extra. The key dates in the letter are listed on your dashboard.