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 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 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 (tribunal application 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 claim.

Lodge a tribunal application

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

State tribunal limits for small claims (2025):

• NSW — NCAT up to $30,000
• VIC — VCAT up to $10,000 (general civil), $100,000 (building and property)
• QLD — QCAT up to $25,000
• WA — SAT up to $10,000
• SA — SACAT up to $12,000
• TAS — Magistrates Court (small claims) up to $5,000
• ACT — ACAT up to $25,000
• NT — Local Court up to $25,000

What you need to lodge:

• Completed application form (available on the tribunal 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 (typically $50-$300 depending on claim size and state)

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

1. Lodge application
2. Tribunal serves 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. Tribunal makes an order

Timeline: 8-16 weeks from lodgement to final order in most states.

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
• Accept that unsecured creditors often recover 10-30 cents in the dollar

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

How ClaimDone helps tradies recover unpaid debts

ClaimDone generates professionally formatted demand letters, attaches your evidence, and delivers them automatically to the subcontractor.

What you get:

• AI-drafted letter citing contract law and quantum meruit principles
• Automatic delivery via registered post and email
• Evidence pack attached (invoices, quotes, photos)
• Follow-up final demand if needed
• Tribunal application pack prepared if the debt remains unpaid

Flat fee. No subscription. Done in 60 minutes.

For debts over $4,000 owed by a registered company, ClaimDone 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.

When to get a lawyer

Most tradie debt recovery disputes resolve with a demand letter or tribunal claim. You do not need a lawyer for those steps.

Get a lawyer if:

• The debt is over the tribunal limit and you need to sue in a higher court
• The subcontractor has filed a complex defence raising legal issues beyond defects
• You are facing a counterclaim for damages
• The subcontractor is insolvent and you need advice on director liability or trust claims
• The contract involves a construction trust under state legislation

For standard unpaid invoices under $30,000, self-representation with a well-drafted demand letter and tribunal application is typically the most cost-effective path.

Start your demand letter now

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

No subscription. No hidden costs. Done in 60 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 a contractual right, you can typically claim interest under state penalty interest legislation once you obtain a tribunal or court order.

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 tribunal application or, if the debt is large enough, a statement of claim in the Magistrates or 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?

Possibly, depending on your state. NSW, QLD, and VIC have security of payment legislation allowing subcontractors to lodge payment claims and, in some cases, register charges. This is complex and state-specific — seek legal advice if the debt is large.

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

You can enforce the tribunal 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.