An invoice sitting unpaid for 90 days is a serious problem. You’ve sent reminders, made phone calls, and the debtor has gone silent or keeps making excuses. Now you need to escalate.
If the debtor is a registered company and owes $4,000 or more, you can issue a statutory demand under the Corporations Act. For amounts below $4,000, sole traders, partnerships, or when you want a less aggressive first step, a final demand is the appropriate choice.
This guide explains the strategic and procedural differences so you can recover what you’re owed without wasting time on the wrong approach.
What is a final demand?
A final demand is the last formal notice you send before taking legal action. It’s a strongly worded letter that makes clear you will commence tribunal or court proceedings if payment is not received by a specified deadline (typically 7-14 days).
When to use a final demand:
- The debtor is a sole trader, partnership, or individual (not a company)
- The debt is under $4,000
- You’ve already sent a standard letter of demand and received no response
- You want one more attempt at settlement before filing a tribunal application
- The debtor is a company but you prefer a less aggressive approach first
A final demand does not trigger automatic legal consequences. It’s a warning. If ignored, you must file in the relevant tribunal or court.
What is a statutory demand?
A statutory demand is a formal notice issued under the Corporations Act. It can only be served on a registered company (Pty Ltd or Ltd) and only for debts of $4,000 or more.
The statutory demand gives the company 21 days to either:
- Pay the debt in full
- Secure or compound the debt to your reasonable satisfaction
- Apply to set aside the demand (requires proving a genuine dispute or defect)
If the company does none of the above, you can apply to wind up the company — a process that often forces immediate payment because directors face personal liability risks and the company’s bank accounts can be frozen.
When to use a statutory demand:
- The debtor is a registered Australian company
- The debt is $4,000 or more
- The debt is liquidated (a specific, ascertained amount)
- The debt is not genuinely disputed
- You are prepared to follow through with wind-up proceedings if necessary
A statutory demand is not a bluff. If you issue one and do not follow through, you lose credibility and may be liable for the debtor’s costs if they successfully challenge it.
Key differences: final demand vs statutory demand
| Factor | Final Demand | Statutory Demand | |————|——————|———————-| | Debtor type | Any — individual, sole trader, partnership, company | Registered company only | | Minimum debt | No minimum | $4,000 | | Legal basis | Common law, contract law | Corporations Act | | Form required | No prescribed form | Form 509H + supporting affidavit | | Deadline | Typically 7-14 days (you choose) | 21 days (fixed by statute) | | Consequence if ignored | You must file tribunal/court claim | You can apply to wind up the company | | Cost to prepare | Low (letter only) | Moderate (form + affidavit + service) | | Psychological impact | Strong | Extreme — directors fear wind-up |
Strategic considerations: which one should you use?
Use a final demand if:
The debtor is not a company. Statutory demands only apply to Pty Ltd and Ltd entities. If you’re chasing a sole trader or individual, a final demand is your only pre-action option.
The debt is under $4,000. You cannot issue a statutory demand for amounts below the threshold, even if the debtor is a company.
You want to preserve the relationship. A statutory demand is nuclear. If there’s any chance of ongoing business or goodwill, a final demand gives you leverage without burning bridges.
You’re not ready to wind up a company. Issuing a statutory demand when you have no intention of following through is dangerous. The debtor may call your bluff, and you’ll have wasted time and credibility.
Use a statutory demand if:
The debtor is a company and owes $4,000+. This is the most effective debt recovery tool available. Directors will prioritise your invoice over almost anything else because wind-up proceedings put their company at existential risk.
You’ve already tried softer approaches. If you’ve sent reminders, a letter of demand, and even a final demand, and the company is still ignoring you, the statutory demand forces their hand.
The debt is clear and undisputed. Do not issue a statutory demand if there is any genuine dispute about the amount owed, the quality of work, or whether the invoice is valid. The company can apply to set aside the demand, and you may be ordered to pay their legal costs.
You are prepared to follow through. If the company does not comply within 21 days, you must be ready to file a wind-up application. This typically costs $2,000–$5,000 in legal and filing costs, but the threat alone usually triggers payment.
What happens after you serve a statutory demand?
Once the company is served with Form 509H and the supporting affidavit, the 21-day clock starts. The company has three options:
- Pay the debt in full. This is the most common outcome. Directors do not want wind-up proceedings on their company’s record.
- Secure or compound the debt. This means offering a payment plan or security (e.g., a bank guarantee) that you find acceptable. You are not obliged to accept — it must be to your reasonable satisfaction.
- Apply to set aside the demand. The company can file an application within 21 days, arguing either:
- There is a genuine dispute about the debt
- The company has an offsetting claim
- There is a defect in the demand that causes substantial injustice
If the company does nothing, you can file a wind-up application. At this point, the company is presumed insolvent, and the court can appoint a liquidator. Most companies pay immediately rather than face this outcome.
What happens after you send a final demand?
A final demand has no statutory teeth. If the debtor ignores it, you must file a claim in the appropriate tribunal or court:
- Under $10,000 (NSW): NCAT
- Under $10,000 (VIC): VCAT
- Under $25,000 (QLD): QCAT
- Other states: Check your local small claims or civil tribunal
The tribunal process typically requires:
- Filing an application (with a filing fee, typically $50–$200)
- Serving the application on the debtor
- Attending a hearing (in person or online)
- Presenting your evidence (invoices, contracts, correspondence)
If you win, the tribunal issues an order for payment. If the debtor still does not pay, you must enforce the order through a sheriff, garnishee, or other enforcement mechanism.
Common mistakes to avoid
Issuing a statutory demand for a disputed debt. If the debtor has raised a legitimate dispute about the quality of work, the amount owed, or whether the invoice is valid, do not issue a statutory demand. The company will apply to set it aside, and you will waste time and money.
Threatening a statutory demand without following through. If you issue a statutory demand and the company ignores it, you must file a wind-up application. If you do not, the company will know you are bluffing, and you lose all leverage.
Using a final demand when a statutory demand is available. If the debtor is a company and owes $4,000 or more, a final demand is a weaker tool. Use the statutory demand.
Serving the statutory demand incorrectly. Form 509H must be served personally on the company’s registered office or a director. Email or post is not sufficient. If service is defective, the entire demand is invalid.
How Claim Done helps
If you’re owed money by a company and the debt is $4,000 or more, Claim Done prepares your statutory demand in under 60 minutes. You complete a short intake form, upload your invoices and evidence, and our Proprietary AI Engine generates Form 509H and the supporting affidavit template, formatted to comply with the Corporations Act.
For debts under $4,000, or where you prefer a less aggressive first step, ClaimDone’s final demand service drafts and sends a professionally formatted letter citing the applicable law and making clear your intention to commence tribunal proceedings.
Both services are flat-fee, no subscription, and completed in under an hour.
Final word
An unpaid invoice over 90 days requires escalation. If the debtor is a company and owes $4,000 or more, the statutory demand is the most powerful tool available — but only if you’re prepared to follow through. For smaller debts, sole traders, or where you want one final attempt at settlement, a final demand is the right choice.
Choose the tool that matches your situation, serve it correctly, and follow through. Most debtors pay when they realise you are serious. If you’re ready to escalate with a statutory demand, ClaimDone prepares your Form 509H and affidavit in under an hour — flat fee, no subscription, Australia-wide.
Frequently Asked Questions
Can I issue a statutory demand for an invoice under $4,000?
No. The minimum debt threshold under the Corporations Act is $4,000. For amounts below this, use a final demand and prepare to file a tribunal claim if ignored.
What if the company disputes the debt after I serve a statutory demand?
The company can apply to the court to set aside the demand within 21 days if it can prove a genuine dispute. Do not issue a statutory demand if there is any legitimate dispute about the amount owed or the quality of work.
How long does a final demand give the debtor to pay?
You set the deadline — typically 7 to 14 days. The deadline should be reasonable but firm. Make clear that you will commence tribunal proceedings if payment is not received by the specified date.
Can I send a statutory demand by email?
No. A statutory demand must be served personally on the company’s registered office or a director. Email or post is not sufficient service under the Corporations Act. If service is defective, the demand is invalid.
What happens if I issue a statutory demand but don't follow through with wind-up proceedings?
You lose credibility and leverage. The debtor will know you are bluffing, and future demands will be ignored. Only issue a statutory demand if you are genuinely prepared to file a wind-up application if the company does not comply.
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