Subcontractor Won’t Pay You: Debt Recovery Options for Australian Tradies

You finished the job. You sent the invoice. Now the subcontractor who hired you has gone quiet, or they’re making excuses, or they’re claiming defects that don’t exist. You need to get paid.

This guide covers the debt recovery options available to tradies when a subcontractor won’t pay — from the first demand letter through to tribunal claims and statutory demands.

Why subcontractors don’t pay

Common reasons subcontractors withhold payment:

• Cash flow issues — they haven’t been paid by the head contractor or client
• Dispute over quality — real or invented defects used as leverage
• Scope creep claims — arguing you did work outside the agreed scope
• Retention games — holding back final payment indefinitely
• Insolvency — the company is in financial trouble
• Bad faith — they never intended to pay in full

Understanding the reason helps you choose the right recovery strategy. A solvent subcontractor playing games responds differently to a formal demand than one genuinely struggling with cash flow.

Send a letter of demand first

A letter of demand states the amount owed, the work completed, the payment terms breached, and the deadline for payment (typically 7-14 days).

What makes a demand letter effective:

• Cites the contract terms or agreed scope of work
• Attaches copies of invoices, quotes, and any signed agreements
• Sets a clear deadline
• States the consequences of non-payment (tribunal or court claim, statutory demand, legal costs)

Common mistakes tradies make:

• Vague amounts — “you owe me for the bathroom reno” instead of an itemised invoice
• No deadline — the letter has no urgency
• Emotional language — calling them dishonest or incompetent undermines your professionalism
• No evidence attached — demand letters work best when backed by documentation

A properly drafted demand letter resolves many tradie debt disputes without further action. The subcontractor realises you are serious, organised, and prepared to escalate.

Escalate to a final demand

If the first letter is ignored, send a final demand. This is shorter, firmer, and explicitly states you will commence tribunal or court proceedings or serve a statutory demand within 7 days.

Key differences from the first demand:

• References the previous letter and the ignored deadline
• Confirms the debt remains unpaid
• States the exact next step (small claim or statutory demand)
• Adds any accrued interest if your contract allows it
• Sent via registered post or email with read receipt

Final demands work because they signal you are not going away. Many subcontractors pay at this stage to avoid the cost and reputational damage of a tribunal or court claim.

Lodge a small claim with the tribunal or court

If the debt is under the small claims limit in your state, this is typically your most cost-effective enforcement option.

Where a small debt claim goes in each state:

• New South Wales — Local Court, Small Claims Division up to $20,000 (General Division over $20,000 up to $100,000). A business debt does not go to NCAT, which hears consumer claims brought by the consumer.
• Victoria — VCAT, Civil Claims List
• Queensland — QCAT minor civil dispute up to $25,000
• Western Australia — Magistrates Court, minor case claims up to $10,000 (general procedure claims up to $75,000)
• South Australia — Magistrates Court, minor civil action up to $12,000 (general claims up to $100,000)
• Tasmania — Magistrates Court (Civil Division) up to $50,000
• Australian Capital Territory — ACAT civil disputes up to $25,000
• Northern Territory — NTCAT small claims up to $25,000

What you need to lodge:

• Completed application form or statement of claim (available on the tribunal’s or court’s website)
• Copies of all invoices, quotes, contracts, and correspondence
• Evidence the work was completed (photos, signed completion certificates, timesheets)
• Proof the demand letters were sent and ignored
• Filing fee (fees change each 1 July; check the current fee on the tribunal’s or court’s website before you file)

Small claims are designed for self-represented parties. You do not need a lawyer. The process is:

1. Lodge your claim
2. The claim is served on the respondent (the subcontractor)
3. Respondent files a defence (if they dispute the claim)
4. Directions hearing (if needed)
5. Final hearing — you present your evidence, they present theirs
6. The tribunal or court makes an order

Timeline: depends on the tribunal or court list and whether the claim is defended.

Statutory demand for company debtors

If the subcontractor is a registered company (Pty Ltd), and the debt is $4,000 or more, you can serve a statutory demand under the Corporations Act.

How it works:

• You prepare the statutory demand form and a supporting affidavit
• The form demands payment within 21 days
• If the company does not pay or apply to set aside the demand, you can commence wind-up proceedings
• The threat of wind-up is often enough to force payment

When to use a statutory demand:

• The debt is undisputed and for a specific amount
• The debtor is a registered company
• You are prepared to follow through with wind-up proceedings if they ignore it
• The company is solvent enough that the threat matters

When NOT to use a statutory demand:

• The debt is genuinely disputed (they claim defects or incomplete work)
• The debtor is a sole trader or partnership (statutory demands only apply to companies)
• The amount is under $4,000

Statutory demands are powerful but technical. If you get the form wrong, the company can apply to set it aside.

When the subcontractor claims defects

This is the most common defence. The subcontractor alleges your work was defective, incomplete, or not to specification — and uses that as justification to withhold payment.

How to respond:

• Demand specifics in writing — what defects, where, when were they identified
• Offer to rectify genuine defects (if minor and cost-effective)
• Obtain an independent assessment if the defects are disputed
• Point out that defects do not void the entire invoice — they only reduce payment by the cost of rectification
• If the defects are invented, state this clearly and proceed with enforcement

Under Australian contract law, a party cannot withhold the entire payment for minor defects. They can only withhold an amount proportionate to the cost of fixing the defect.

When the subcontractor is insolvent

If the subcontractor’s company is insolvent, your options narrow significantly.

Warning signs of insolvency:

• Repeated excuses about cash flow
• Other creditors chasing them publicly
• ASIC records show recent changes in directors or registered office
• Director’s home address listed as the business address

Your options if they are insolvent:

• Lodge a proof of debt if they enter voluntary administration
• Attend creditors’ meetings

Do not throw good money after bad. If the company is genuinely insolvent, a tribunal or court order is worthless.

How Claim Done helps tradies recover unpaid debts

Claim Done generates professionally formatted demand letters, attaches your evidence, and delivers them by email to the subcontractor.

What you get:

• Letter drafted by our Programmatic Algorithms, citing contract law and quantum meruit principles
• Email delivery by email
• Evidence pack attached (invoices, quotes, photos)
• Follow-up final demand if needed
• Tribunal Application ($97) prepared if the debt remains unpaid

Flat fee. No subscription. Done in about 5 minutes.

For debts over $4,000 owed by a registered company, Claim Done prepares statutory demands with the supporting affidavit template.

Preventing non-payment in future jobs

Once you recover this debt, protect yourself on the next job:

• Written quotes — always get the scope, price, and payment terms in writing
• Progress payments — invoice at milestones, not just at the end
• Retention clauses — agree upfront what percentage (if any) can be held back and for how long
• Personal guarantees — if the subcontractor is a company, ask the director to personally guarantee payment
• Right to suspend work — include a clause allowing you to stop work if payment is overdue

These clauses do not guarantee payment, but they make enforcement faster and cheaper.

Start your demand letter now

If a subcontractor won’t pay you in Australia, start with a professionally drafted demand letter. Claim Done generates it, attaches your evidence, and sends it by email — all for a flat fee.

No subscription. No hidden costs. Done in about 5 minutes.

Generate your demand letter now and get paid faster.

Frequently Asked Questions

Can I charge interest on an overdue subcontractor invoice?

Yes, if your contract includes an interest clause or if your invoice states interest terms. Without an interest clause, a court can still award interest from the date the debt was due at its pre-judgment rate (see your court’s interest rate page).

What if the subcontractor is a sole trader, not a company?

You cannot serve a statutory demand on a sole trader. Your options are a letter of demand followed by a small claim in your state’s tribunal or court or, if the debt is larger, a claim in a higher court or division (for example the Local Court’s General Division in New South Wales, or the District Court).

How long do I have to chase an unpaid invoice in Australia?

The limitation period for debt recovery is generally 6 years from the date the debt became due. After that, the debt is statute-barred and cannot be enforced through the courts.

Can I put a lien on the property I worked on?

Every state and territory has security of payment legislation. Queensland also allows a subcontractor’s charge, and NSW a payment withholding request.

What happens if I win at tribunal but the subcontractor still won't pay?

You can enforce the order through a garnishee order (seizing money from their bank account), a warrant for the seizure and sale of property, or an examination summons to identify assets. Enforcement is a separate process after you win.