A statutory demand gives you exactly 21 days to pay, apply to set it aside, or face wind-up proceedings. Miss that deadline and the creditor can apply to wind up your company — even if the debt is genuinely disputed.
This guide explains the grounds for setting aside a statutory demand, what documents you need to file, and how to prepare your response without a lawyer.
What is a statutory demand?
A statutory demand is a formal notice demanding payment of a debt of $4,000 or more within 21 days. It is issued under the Corporations Act and served directly on your company at its registered office — not filed with any court.
If you do not pay or apply to set it aside within 21 days, the creditor can presume your company is insolvent and commence wind-up proceedings.
The 21-day deadline
The 21-day period starts from the date the statutory demand is served. Service is typically by post to the registered office listed on the ASIC register, or by personal delivery to a director.
Within those 21 days, you must either:
- Pay the full amount claimed
- Apply to the court to set aside the demand
- Do nothing — and risk wind-up proceedings
There is no extension. If you file your application on day 22, the court will likely refuse to hear it.
Grounds for setting aside a statutory demand
You cannot set aside a statutory demand simply because you disagree with the amount. The grounds are narrow and defined by statute.
Genuine dispute about the debt
The most common ground. You must show there is a genuine dispute about whether the debt exists or the amount claimed. You do not need to prove your case — only that there is a real question to be determined.
Examples:
- The goods or services were defective or not provided
- The invoice has already been paid
- The debt is statute-barred
- The contract was never properly formed
- The amount claimed includes penalties or interest not agreed to
The dispute must be genuine, not spurious or contrived.
Offsetting claim
If your company has a genuine claim against the creditor that brings the undisputed debt below $4,000 (it can come from a different transaction), you can apply to set aside the demand on the basis of an offsetting claim.
Example: The creditor owes you $10,000 for defective work, and they are claiming $6,000 from you. Your offsetting claim may exceed the demand.
The offsetting claim must be quantified and genuine. You cannot rely on a vague counterclaim.
Defect in the demand
A statutory demand must comply strictly with the form and content requirements. If it does not, the court may set it aside.
Common defects:
- Incorrect company name or ACN
- Demand served at the wrong address
- Supporting affidavit not properly sworn
- Demand does not specify the debt with sufficient particularity
- Creditor’s address for payment is unclear
Not every defect will result in the demand being set aside. The court will consider whether the defect causes substantial injustice.
Other reasons
The court has discretion to set aside a statutory demand for “some other reason”. This is rarely successful unless there is a serious procedural irregularity or abuse of process.
What you need to file
To apply to set aside a statutory demand, you must file:
- Application (Form 459G) — the prescribed form
- Supporting affidavit — sworn by a director or officer, setting out the facts and grounds for setting aside
- Copy of the statutory demand — annexed to the affidavit
These documents must be filed in the Federal Court or Supreme Court (depending on jurisdiction) and served on the creditor within the 21-day period.
What goes in the affidavit
The affidavit is the most important document. It must set out:
- The facts showing a genuine dispute, offsetting claim, or defect
- The evidence supporting those facts (invoices, emails, contracts, payment records)
- The amount in dispute or the value of the offsetting claim
- Why the demand should be set aside
The affidavit must be sworn before a solicitor, justice of the peace, or other authorised person. It must comply with the court’s affidavit rules — numbered paragraphs, exhibits properly marked, no argument or opinion.
If the affidavit is vague or does not disclose a genuine dispute, the court will dismiss the application and the creditor can proceed with wind-up.
The court process
Once you file the application, the court will set a hearing date. Both parties will file written submissions and the matter will be heard by a judge.
The hearing is not a trial of the dispute. The court is only deciding whether the statutory demand should be set aside. If the court finds a genuine dispute, it will set aside the demand and the creditor must pursue the debt through normal proceedings.
If the court dismisses the application, the creditor can apply to wind up your company. At that stage, you cannot raise the genuine dispute again.
Costs
If you successfully set aside the demand, the creditor will usually pay your costs. If you lose, you will pay the creditor’s costs — often $5,000-$15,000 depending on the complexity.
File only if you have a genuine dispute or valid ground. Do not file a speculative application hoping the creditor will back down.
Final steps after filing
Once your affidavit is sworn and the application is filed, serve a copy on the creditor’s solicitor (or the creditor directly if they are unrepresented). File an affidavit of service with the court proving you served the documents within time.
Attend the hearing. If you do not appear, the court will likely dismiss your application and award costs against you.
If the demand is set aside, the creditor must pursue the debt through normal court proceedings. If the demand is not set aside, decide whether to pay the debt or negotiate a settlement before wind-up proceedings commence.
How Claim Done helps
Claim Done does not prepare applications to set aside a statutory demand. The application and a supporting affidavit must be filed with the Supreme Court or the Federal Court, and served on the creditor, within 21 days of service of the demand (Corporations Act 2001, s 459G). That time cannot be extended, so get legal advice straight away.
Get advice now
If you have been served with a statutory demand and you have a genuine dispute, offsetting claim, or believe the demand is defective, get legal advice now so the application is filed and served within the 21 days.
Frequently Asked Questions
Can I ignore a statutory demand if I think the debt is wrong?
No. Ignoring a statutory demand does not make it go away. If you do not apply to set it aside within 21 days, the creditor can apply to wind up your company. Even if the debt is genuinely disputed, you must file an application within the deadline.
Do I need a lawyer to respond to a statutory demand?
Not necessarily. If you have a clear genuine dispute and the evidence to support it, you can prepare the application and affidavit yourself. Claim Done does not prepare them.
What happens if I file the application on day 22?
The court will likely refuse to hear it. The 21-day deadline is strict and there is no discretion to extend it. If you miss the deadline, the creditor can proceed with wind-up proceedings and you cannot raise the dispute at that stage.
Can I set aside a statutory demand if I just need more time to pay?
No. Needing more time to pay is not a ground for setting aside a statutory demand. The grounds are limited to genuine dispute, offsetting claim, or defect in the demand. If you cannot pay within 21 days, negotiate directly with the creditor or seek urgent financial advice.
How much does it cost to apply to set aside a statutory demand?
Court filing fees vary, so check the court’s current fee before you apply. If you lose, you will also pay the creditor’s legal costs.
What the 21 days mean
Same problem. What a prepared case looks like.