Subcontractor Didn’t Pay You: Letter of Demand or Notice to Remedy?

You finished the job. You sent the invoice. The head contractor or subcontractor hasn’t paid. Now what?

If you’re a tradie, subcontractor, or supplier working on a construction project in Australia, you have two main debt recovery options: lodge a payment claim under your state’s Security of Payment Act, or send a letter of demand citing standard contract and debt law. Each pathway has different timelines, costs, and enforcement mechanisms.

Security of Payment legislation in Australia

Every Australian state and territory has a Security of Payment Act designed to keep cash flowing through the construction industry. These laws give subcontractors, tradies, and suppliers a fast statutory right to payment, even if there’s a contractual dispute.

The key Acts are:

• NSW: Building and Construction Industry Security of Payment Act 1999
• VIC: Building and Construction Industry Security of Payment Act 2002
• QLD: Building Industry Fairness (Security of Payment) Act 2017
• WA: Construction Contracts Act 2004
• SA: Building and Construction Industry Security of Payment Act 2009
• TAS: Building and Construction Industry (Security of Payment) Act 2009
• ACT: Building and Construction Industry (Security of Payment) Act 2009
• NT: Construction Contracts (Security of Payments) Act 2004

These Acts create a payment claim and adjudication process that runs parallel to the courts. If you’re owed money for construction work and the payer doesn’t respond or disputes your claim, an independent adjudicator can decide the matter in 10–15 business days.

When Security of Payment typically applies:

• You performed construction work or supplied related goods or services
• The work was done under a construction contract (written, oral, or implied)
• The contract relates to construction work in Australia
• You have not been paid the progress payment you’re entitled to

When it typically does not apply:

• Residential building work where the owner occupies or intends to occupy the premises (exemptions vary by state)
• Work done outside a construction contract
• Disputes requiring expert determination on quality or defects

If your situation falls outside the Security of Payment Acts, or if the statutory time limits have passed, a letter of demand is your next step.

Payment claim under Security of Payment Acts

A payment claim is a formal written notice served under your state’s Security of Payment Act. It states the amount you’re claiming, the work done, and the basis of your entitlement.

How it works:

1. Serve the payment claim on the party liable to pay. The claim must include the amount claimed, a description of the work, and reference the contract or purchase order.
2. Payment response deadline: The payer typically has 10 business days to serve a payment schedule. If they don’t respond, they must pay the full claimed amount.
3. If they dispute: If the payer serves a payment schedule offering less than you claimed, you can apply for adjudication within the timeframe set by your state’s Act (typically 10 business days).
4. Adjudication: An independent adjudicator reviews the claim and response, then issues a determination within 10–15 business days. The determination is binding and immediately enforceable as a judgment debt.

Advantages:

• Fast — adjudication typically resolves within 3–4 weeks from serving the claim
• Low cost compared to court proceedings
• Interim binding decision — you get paid while any underlying dispute continues
• Strong enforcement — adjudication certificates can be filed as judgments

Disadvantages:

• Strict time limits — you must serve the payment claim within the timeframe allowed by your contract or the Act
• Technical requirements — if your claim doesn’t comply with the Act, it can be rejected
• Limited to construction work — does not apply to general commercial debts
• State-specific rules — you need to follow the correct procedure for your state

When to use a payment claim:

• You’re a subcontractor, tradie, or supplier on a construction project
• The work was completed recently (within the claim period under your contract or the Act)
• The amount is substantial enough to justify the adjudication process
• The payer is disputing the amount or has gone silent

Letter of demand for construction debts

A letter of demand is a formal written notice that you are owed money and will take legal action if the debt is not paid. It applies to any debt, including construction debts that fall outside the Security of Payment Acts or where the statutory time limits have passed.

How it works:

1. Draft and send the letter: State the amount owed, the basis of the debt, the payment deadline (typically 7–14 days), and the consequences of non-payment (tribunal claim, court action, or statutory demand if the debtor is a company).
2. Wait for response: Most debtors either pay, propose a payment plan, or dispute the debt.
3. Escalate if ignored: If the debtor does not respond, you can file a tribunal application (for debts under the tribunal limit in your state) or a court claim for larger amounts.

Advantages:

• No strict time limits — you can send a letter of demand at any time within the limitation period (typically 6 years for contract debts)
• Applies to any debt — construction, services, goods, unpaid invoices
• Low cost — preparing and sending a letter of demand is inexpensive
• Often prompts payment — a formal letter signals you are serious and prepared to take legal action

Disadvantages:

• Slower than adjudication — if the debtor disputes, you must go to a tribunal or court, which can take months
• No interim binding decision — you don’t get paid until the tribunal or court rules in your favour
• Limited enforcement power — the letter itself has no legal force; it’s a precursor to formal proceedings

When to use a letter of demand:

• The Security of Payment Act does not apply to your situation
• The statutory time limits for a payment claim have passed
• The debt is for non-construction work
• You want to give the debtor a final chance to pay before escalating
• The amount is suitable for tribunal proceedings if the debtor does not pay

Notice to remedy breach for contractual disputes

If your contract includes a clause requiring formal notice before terminating or claiming damages, you may need to send a notice to remedy breach instead of or in addition to a letter of demand.

A notice to remedy breach states that the other party has breached the contract, specifies the breach, and gives them a set period (typically 7–14 days) to fix it. If they don’t remedy the breach, you can terminate the contract and claim damages.

When to use a notice to remedy breach:

• Your contract requires formal notice before termination or legal action
• The breach is more than just non-payment — e.g. failure to provide access, defective work, or repudiation
• You want to preserve the right to terminate the contract and claim consequential damages, not just the unpaid amount

A notice to remedy breach is not a substitute for a payment claim or letter of demand. It’s a separate contractual step. If the breach is non-payment, you can send both a payment claim (if the Security of Payment Act applies) and a notice to remedy breach (if your contract requires it).

Which pathway should you choose?

Use a payment claim under the Security of Payment Act if:

• You’re a subcontractor, tradie, or supplier on a construction project
• The work was completed within the claim period under your contract or the Act
• You want a fast, binding decision (adjudication within 3–4 weeks)
• The payer is disputing the amount or has not responded to your invoice

Use a letter of demand if:

• The Security of Payment Act does not apply
• The statutory time limits for a payment claim have passed
• You want to give the debtor a final chance to pay before starting tribunal or court proceedings
• The debt is straightforward and you expect the debtor to pay once formally notified

Use a notice to remedy breach if:

• Your contract requires formal notice before termination or claiming damages
• The breach is broader than non-payment
• You want to preserve the right to terminate the contract and claim consequential losses

In many cases, you can use more than one pathway. For example, you might serve a payment claim under the Security of Payment Act for the unpaid progress payment, and separately send a notice to remedy breach for defective work or delays caused by the head contractor.

How ClaimDone helps subcontractors recover unpaid debts

ClaimDone generates professionally formatted letters of demand tailored to construction and subcontractor disputes. You upload your invoices, contract, and any correspondence, and our Proprietary AI Engine drafts a letter citing the applicable Australian law — including the Australian Consumer Law, contract law principles, and relevant state legislation.

The letter is delivered automatically to the debtor via registered post and email, giving them 7–14 days to pay before you escalate to tribunal or court proceedings.

What ClaimDone does:

• Analyses your evidence and identifies the legal basis for your claim
• Drafts a letter citing the applicable law and setting out your entitlement
• Delivers the letter to the debtor automatically
• Provides a clear escalation pathway if the debtor does not respond

What ClaimDone does not do:

• Lodge payment claims under Security of Payment Acts (these require state-specific forms and adjudication procedures)
• Provide legal advice on complex contractual disputes
• Represent you in adjudication, tribunal, or court proceedings

For payment claims under Security of Payment Acts, or for high-value or complex disputes, consult a construction lawyer who specialises in your state’s legislation.

Act fast and document everything

Whether you choose a payment claim or a letter of demand, speed matters. Security of Payment Acts have strict time limits, and delays weaken your position in any dispute.

Before you act:

• Gather all invoices, contracts, purchase orders, and correspondence
• Confirm the correct legal name and address of the debtor
• Check whether the Security of Payment Act applies to your situation
• Calculate the exact amount owed, including any interest or costs

After you send the claim or letter:

• Keep proof of delivery (registered post receipt, email read receipt)
• Monitor the deadline for response
• If the debtor disputes, seek legal advice before proceeding to adjudication or tribunal
• If the debtor ignores the claim, escalate immediately

Get your letter of demand prepared now

If the Security of Payment Act does not apply to your situation, or if you want to give the debtor a final formal notice before escalating, ClaimDone prepares your letter of demand in 60 minutes for a flat $79 fee. Upload your evidence, answer a few questions, and our system drafts a professionally formatted letter citing the applicable Australian law. The letter is delivered automatically to the debtor, and you receive a copy for your records. No subscription. No hidden fees. Get your letter of demand prepared by ClaimDone.

Frequently Asked Questions

Can I send a letter of demand and a payment claim at the same time?

Yes, but they serve different purposes. A payment claim is a statutory notice under the Security of Payment Act that can lead to adjudication. A letter of demand is a general debt recovery notice. If your payment claim is rejected or disputed, a letter of demand can support a subsequent tribunal or court claim. However, do not use a letter of demand as a substitute for a payment claim if the Act applies — you may lose your statutory rights.

What happens if I miss the deadline for a payment claim under the Security of Payment Act?

If you miss the statutory deadline for serving a payment claim, you lose the right to adjudication for that progress payment. You can still recover the debt through a letter of demand and tribunal or court proceedings, but you will not have access to the fast adjudication process. Time limits vary by state and contract, so act immediately if you suspect non-payment.

Do I need a lawyer to lodge a payment claim under the Security of Payment Act?

No, you can lodge a payment claim yourself. However, the Acts have strict technical requirements, and mistakes can result in your claim being rejected. Many subcontractors use a construction lawyer or specialist consultant to prepare and serve the payment claim, especially for high-value disputes. For a standard letter of demand, ClaimDone can prepare it for you in 60 minutes.

What if the head contractor disputes the quality of my work?

If the dispute is genuinely about defects or quality, the Security of Payment Act may still apply, but the adjudicator will consider the evidence from both sides. If the dispute is complex and requires expert reports, you may need to pursue the matter through a tribunal or court instead. A letter of demand can be used to formalise your position and set out your entitlement, even if the matter ends up in a tribunal.

Can I claim interest on the unpaid amount?

Yes, if your contract includes an interest clause, or under the penalty interest provisions in some Security of Payment Acts. For a letter of demand, you can claim interest under the contract or at the applicable statutory rate. ClaimDone’s letter of demand service includes interest calculations where applicable.