Subcontractor Didn’t Get Paid: Can You Issue a Statutory Demand?

You finished the job. You sent the invoice. The company hasn’t paid. You’ve chased them twice, maybe three times. Now what?

If you’re a subcontractor owed $4,000 or more by a registered company, a statutory demand is one of the most powerful debt recovery tools available. It gives the debtor 21 days to pay in full, dispute the debt with supporting evidence, or face presumed insolvency and potential wind-up proceedings.

What is a statutory demand?

A statutory demand is a formal notice under the Corporations Act 2001. It requires a company to pay a debt of at least $4,000 within 21 days or prove the debt is genuinely disputed.

If the company does neither, it is presumed to be insolvent. That presumption allows you to apply to wind up the company — a serious consequence that often motivates payment.

The demand must be in the prescribed form and served correctly. If it’s defective or the debt doesn’t meet the statutory requirements, the demand can be set aside by the court.

When can a subcontractor use a statutory demand?

You can issue a statutory demand if:

• The debtor is a registered company — check the Australian Business Register or ASIC register. Sole traders, partnerships, trusts, and individuals cannot be served with a statutory demand.
• The debt is $4,000 or more — this is the minimum threshold. You can include multiple unpaid invoices if they total at least $4,000.
• The debt is liquidated — a fixed, ascertainable amount. Not estimated damages or unliquidated claims.
• The debt is not genuinely disputed — if the company has raised a legitimate dispute about the work quality, scope, or contract terms, a statutory demand is not appropriate.
• The debt is due and payable — payment terms have expired. If the invoice says “30 days net” and it’s only been 15 days, the debt is not yet due.

If all five conditions are met, you can prepare and serve a statutory demand.

What debts qualify?

Unpaid invoices for completed work are the most common debts recovered via statutory demand. Examples include:

• Construction and building subcontractors — carpentry, plumbing, electrical, tiling, concreting
• Trade services — painting, landscaping, roofing, demolition
• Professional services — engineering, drafting, project management, consulting
• Supply contracts — materials, equipment hire, labour hire

The debt must be for work already completed or goods already supplied. You cannot use a statutory demand to recover anticipated future payments or damages for breach of contract unless those damages are already quantified and undisputed.

Security of payment claims under state-based legislation are a separate process and typically faster than a statutory demand. If you’re in the construction industry and the debt is under a progress claim, check whether a payment claim under security of payment legislation is more appropriate.

What debts do NOT qualify?

You cannot use a statutory demand for:

• Disputed debts — if the company genuinely disputes the amount, quality of work, or whether the work was completed, the debt is not suitable for a statutory demand.
• Unliquidated damages — claims for loss of profit, delay damages, or breach of contract where the amount is not fixed.
• Debts owed by individuals or sole traders — statutory demands only apply to companies registered under the Corporations Act.
• Debts under $4,000 — use a letter of demand or tribunal application instead.
• Offsetting claims — if the company has a genuine cross-claim or set-off that reduces the debt below $4,000, the demand may be set aside.

How to prepare and serve a statutory demand

A valid statutory demand requires two documents:

1. The prescribed form — it must state the debt amount, the company’s details, and the 21-day deadline.
2. Supporting affidavit — sworn before a Justice of the Peace or solicitor, verifying the debt and exhibiting the invoices, contracts, and any correspondence.

The demand must be personally served on the company — either at its registered office or by serving a director or company secretary. Postal service is not sufficient. Email service is not valid unless the company agrees in writing.

Once served, the 21-day period begins. The company has three options:

• Pay the debt in full — the matter ends.
• Apply to set aside the demand — the company must file an application in the Supreme Court or Federal Court within 21 days, supported by an affidavit showing a genuine dispute or other defect.
• Do nothing — the company is presumed insolvent, and you can apply to wind it up.

What happens if the company ignores the demand?

If the company does not pay and does not apply to set aside the demand within 21 days, it is presumed to be insolvent.

You can then file a winding up application in the Supreme Court or Federal Court. The court will typically issue a winding up order unless the company can prove it is solvent or that the debt is genuinely disputed.

A winding up order appoints a liquidator to sell the company’s assets and distribute the proceeds to creditors. This is a serious outcome — many companies pay the debt rather than face liquidation.

However, winding up proceedings are expensive. Court filing fees, legal costs, and the liquidator’s fees can exceed the debt itself. For debts under $20,000, winding up is often not commercially viable unless the company has significant assets.

What if the company disputes the debt?

If the company files an application to set aside the demand within 21 days, the court will hear the dispute. The company must show:

• A genuine dispute — not a frivolous or vexatious claim, but a real question about whether the debt is owed.
• A defect in the demand — incorrect amount, wrong company name, defective affidavit, or procedural error.
• An offsetting claim — a cross-claim that reduces the debt below $4,000.

If the court finds a genuine dispute, it will set aside the demand. You will need to pursue the debt through other means — a tribunal application, letter of demand, or court proceedings.

If the court finds no genuine dispute, the demand stands, and the company must pay or face winding up.

Alternatives to a statutory demand

If your debt does not meet the statutory demand criteria, consider:

• Letter of demand — a formal letter citing the contract and debt recovery principles. Often enough to prompt payment without court involvement.
• Tribunal application — most state and territory tribunals handle debt recovery claims up to $10,000–$25,000 depending on jurisdiction. Faster and cheaper than Supreme Court.
• Security of payment claim — if you’re in the construction industry, a payment claim under state-based security of payment legislation can result in a determination within 10–20 business days.
• Court proceedings — for debts over the tribunal limit or where a judgment is needed for enforcement.

How ClaimDone helps subcontractors recover unpaid debts

ClaimDone prepares the statutory demand form and supporting affidavit template for $197. You complete a 5-minute intake form, upload your invoices and contract, and our Proprietary AI Engine drafts the demand citing the relevant debt.

You receive:

• Prescribed form — correctly formatted, with the company details, debt amount, and 21-day deadline
• Affidavit template — ready to swear before a JP or solicitor
• Service instructions — how to personally serve the demand

The documents are prepared within 60 minutes. You arrange service and swear the affidavit yourself — no ongoing legal fees, no subscription.

For debts under $4,000 or where the debtor is not a company, ClaimDone also offers letter of demand and tribunal application services starting at $79.

Get your statutory demand prepared now

A statutory demand creates real commercial pressure and often results in payment within the 21-day period. But it only works if the debt is liquidated, undisputed, and owed by a company.

If you’re unsure whether a statutory demand is right for your situation, or if the debt involves complex contract disputes, consult a qualified Australian lawyer. For straightforward unpaid invoices where the amount and company details are clear, ClaimDone prepares your statutory demand in 60 minutes for $197 — no subscription, no hourly billing, no ongoing fees.

Frequently Asked Questions

Can I issue a statutory demand to a sole trader who owes me money?

No. Statutory demands under the Corporations Act 2001 only apply to registered companies. If the debtor is a sole trader, partnership, or individual, use a letter of demand or tribunal application instead.

What happens if the company pays part of the debt but not all of it?

If the partial payment reduces the debt below $4,000, the statutory demand is no longer valid and can be set aside. If the remaining debt is still $4,000 or more, the demand stands unless the company applies to set it aside on other grounds.

How long does the company have to respond to a statutory demand?

21 days from the date of service. The company must either pay the debt in full or apply to the court to set aside the demand within that period. If it does neither, it is presumed insolvent.

Can I include multiple unpaid invoices in one statutory demand?

Yes, as long as the total debt is at least $4,000 and all invoices are owed by the same company. Each invoice must be for a liquidated, undisputed amount that is due and payable.

What if the company disputes the quality of my work after I issue the demand?

If the company raises a genuine dispute about the work quality, scope, or contract terms, it can apply to set aside the demand. The court will assess whether the dispute is genuine or just an excuse to avoid payment.