If a company owes your small business money and won’t pay, a statutory demand is the nuclear option. It gives the debtor 21 days to pay in full or face presumed insolvency and potential wind-up proceedings. But it’s not appropriate for every unpaid invoice.
This guide explains when to issue a statutory demand in Australia, the $4,000 threshold, and when this tool is essential versus overkill.
What is a statutory demand?
A statutory demand is a formal notice demanding payment of a debt within 21 days. It must be in the prescribed form (Form 509H) and accompanied by a supporting affidavit verifying the debt.
If the company does not pay, apply to set aside the demand, or secure the debt within 21 days, it is presumed insolvent. That presumption allows you to apply to wind up the company — a process that can force liquidation if the debt remains unpaid.
You do not file a statutory demand with a court or tribunal. You serve it directly on the company’s registered office address (check the ASIC register). The company then has three options: pay, challenge, or ignore.
The $4,000 threshold
The Corporations Act sets a minimum debt of $4,000 (formerly $2,000 until 1 January 2022). This threshold prevents trivial debts being used to threaten wind-up proceedings.
If your debt is less than $4,000, you cannot issue a statutory demand. Use a letter of demand instead, or apply to your state’s tribunal for a money order.
If you are owed multiple invoices by the same company, you can aggregate them — provided they are all liquidated (specific, ascertained amounts) and undisputed. For example, three unpaid invoices totalling $5,200 can support a single statutory demand.
Do not inflate the debt to meet the threshold. Do not include estimated damages, interest you are not contractually entitled to, or amounts the debtor genuinely disputes. A statutory demand for an inflated or disputed amount will typically be set aside, and you may be ordered to pay the debtor’s legal costs.
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When a statutory demand is essential
A statutory demand is the right tool when:
- The debtor is a registered company — Pty Ltd, Ltd, or other corporate entity (check ASIC). Statutory demands do not apply to sole traders, partnerships, or individuals.
- The debt is $4,000 or more — and liquidated (a specific sum, not estimated damages).
- The debt is undisputed — the company has not raised a genuine dispute about liability or quantum.
- You have already sent a letter of demand — and the company ignored it or responded with excuses but no payment.
- The company has assets or ongoing trade — so the threat of wind-up is real. If the company is already insolvent or dormant, a statutory demand achieves nothing.
- You need leverage fast — the 21-day deadline and presumption of insolvency create immediate commercial pressure.
Example: You are a web developer. A Pty Ltd client owes you $6,800 for completed work. You sent a letter of demand 30 days ago. No response. The company is still trading. A statutory demand is appropriate.
When a statutory demand is overkill
Do not issue a statutory demand if:
- The debt is less than $4,000 — you cannot meet the statutory threshold.
- The debtor is an individual or sole trader — statutory demands only apply to companies.
- The debt is genuinely disputed — if the company has raised a legitimate dispute about the work quality, contract terms, or amount owed, the demand will likely be set aside.
- You have not sent a letter of demand first — a statutory demand is not a first step. Always send a letter of demand to give the debtor a chance to pay without the nuclear threat.
- The company is already insolvent or dormant — if the company has no assets, no active trade, or is already in liquidation, a statutory demand is pointless.
- You want to preserve the business relationship — a statutory demand burns bridges. If you might work with this client again, or if they are a major customer, consider negotiating a payment plan first.
Example: A sole trader owes you $3,200. You cannot issue a statutory demand because the debtor is not a company. Send a letter of demand and, if necessary, apply to your state’s small claims tribunal.
The 21-day demand period
Once you serve the statutory demand, the company has 21 days from the date of service to:
- Pay the debt in full — including any interest specified in the demand.
- Apply to set aside the demand — the company can apply to the Supreme Court (or Federal Court) to have the demand set aside if there is a genuine dispute, offsetting claim, or defect in the demand.
- Secure or compound the debt — enter into a payment plan or provide security (rare in practice).
If the company does none of the above, it is presumed insolvent. That presumption lasts for three months from the end of the 21-day period. During that time, you can apply to wind up the company.
The company does not need to pay you directly. If they apply to set aside the demand, the matter goes to court. If the court finds a genuine dispute, the demand is set aside and you are back to square one — possibly liable for the company’s legal costs.
Genuine dispute — the most common defence
The most common reason a statutory demand is set aside is a genuine dispute. A genuine dispute exists if the company can show:
- A bona fide question about whether the debt is owed (e.g., work was defective, contract was never formed, invoice was already paid).
- An offsetting claim (e.g., the company has a counterclaim for damages that exceeds or reduces the debt).
The threshold is low. The company does not need to prove the dispute — only that it is genuine and not spurious. If you issue a statutory demand for a disputed debt, expect it to be set aside.
Example: You claim $8,000 for consulting services. The company says the work was incomplete and not to the agreed standard. That is a genuine dispute. Do not issue a statutory demand. Apply to the tribunal or negotiate a settlement.
How to serve a statutory demand
Service must comply with the Corporations Act. The safest method is personal service at the company’s registered office during business hours. You can also use registered post to the registered office address, but this creates a risk of dispute about whether service was effective.
Do not email a statutory demand. Do not serve it on a director’s home address unless that is also the registered office. Do not serve it on a PO Box unless the registered office is listed as a PO Box on ASIC.
After service, keep proof: photos of the registered office, tracking numbers, signed receipts. You will need an affidavit of service if you later apply to wind up the company.
Costs and risks
Preparing a statutory demand costs $97 with Claim Done — you receive Form 509H and a supporting affidavit template. You must then arrange service (process server fees typically $80–$150) and swear the affidavit before a JP or solicitor (usually free).
Supreme Court applications are expensive. If the court finds the demand was issued for a disputed debt or with a material defect, you may be ordered to pay the company’s legal costs.
A statutory demand is a high-stakes move. If you get it wrong, you pay. If you get it right, you get paid.
Alternatives to a statutory demand
Before issuing a statutory demand, consider:
- Letter of demand — always the first step. Fast, cheap, effective for most debts.
- Payment plan agreement — if the company is willing to pay but needs time, formalise the arrangement in writing.
- Tribunal application — VCAT, QCAT, etc. handle debts up to $10,000–$25,000 (depending on state); in New South Wales, a business debt goes to the Local Court, not NCAT. Slower than a statutory demand, but lower risk if there is any dispute.
- Debt collection agency — if you want to outsource the process and accept a percentage of the debt.
A statutory demand is appropriate when the debt is clear, undisputed, over $4,000, and owed by a solvent company that is ignoring you.
How Claim Done prepares your statutory demand
Claim Done’s Programmatic Algorithms work from what you tell us about your evidence — invoices, contracts, correspondence — and prepare Form 509H and the supporting affidavit in about 5 minutes. You receive:
- Form 509H — compliant with the Corporations Regulations, citing the correct sections and debt amount.
- Affidavit template — verifying the debt, ready to swear before a JP or solicitor.
- Service instructions — step-by-step guide to serving the demand at the registered office.
You complete a 5-minute intake form. Claim Done does the rest. Flat fee, no subscription, Australia-wide.
Final checklist before you issue a statutory demand
Before you serve the demand, confirm:
- ✅ The debtor is a registered company (check ASIC).
- ✅ The debt is $4,000 or more.
- ✅ The debt is liquidated and undisputed.
- ✅ You have already sent a letter of demand.
- ✅ The company is solvent and trading.
- ✅ You are prepared to follow through with wind-up proceedings if the company ignores the demand.
If any of these are uncertain, reconsider. A statutory demand is not a bluff. If you serve it, you must be ready to act.
Get your statutory demand prepared in about 5 minutes
If a company owes your small business $4,000 or more and won’t pay, Claim Done prepares Form 509H and the supporting affidavit for $97. Tell us about your invoices and evidence, complete the intake form, and receive draft statutory demand documents in about 5 minutes, for you to check, sign and serve yourself, Australia-wide. Start your statutory demand now.
Frequently Asked Questions
Can I issue a statutory demand for a debt under $4,000?
No. The Corporations Act sets a minimum threshold of $4,000. If your debt is less, use a letter of demand or apply to your state’s tribunal for a money order.
What happens if the company disputes the debt after I serve the statutory demand?
The company can apply to the Supreme Court to set aside the demand if there is a genuine dispute. If the court agrees, the demand is set aside and you may be ordered to pay the company’s legal costs.
Can I issue a statutory demand to a sole trader or individual?
No. Statutory demands only apply to registered companies (Pty Ltd, Ltd). For sole traders or individuals, use a letter of demand and, if necessary, apply to the tribunal or commence court proceedings.
How long does the company have to respond to a statutory demand?
21 days from the date of service. The company must pay in full, apply to set aside the demand, or secure the debt. If they do nothing, they are presumed insolvent and you can apply to wind up the company.
Do I need a lawyer to issue a statutory demand?
No. You can prepare Form 509H and the supporting affidavit yourself, or use Claim Done to generate them in about 5 minutes. You will need to arrange service and swear the affidavit before a JP or solicitor.
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