What to do today
1. Write down the date the demand was served, and work out day 21. The company has 21 days after service to deal with it (Corporations Act 2001 (Cth) s 459E(2)(c), s 9 "statutory period"). Day 1 is the day after service. If day 21 falls on a weekend or public holiday, the Acts Interpretation Act 1901 (Cth) s 36(2) lets you act on the next working day, but do not plan around that. Aim to be finished days early.
2. Decide which of two paths you are on. Either the company pays, secures or compounds (settles) the debt to the creditor's reasonable satisfaction within the 21 days, or it applies to court to set the demand aside within the same 21 days. There is no third option that stops the clock.
3. If you dispute the debt, get the court papers moving now. The application, a supporting affidavit (a sworn written statement) and service of copies of both on the creditor must all happen inside the 21 days (s 459G(3)). Filing on day 21 and serving on day 22 does not count.
4. If the debt is real, ring the creditor today. Ask for a written payment arrangement that the creditor confirms satisfies the demand. For a tax debt, the ATO says it requires the company to "pay the entire debt or enter into a payment plan with us within 21 days" (ATO: Legal action we may take).
There is no fee to respond to a demand by paying or agreeing terms. Applying to set it aside in the Federal Court costs a company a $5,255 filing fee (from 1 July 2026).
This is legal information about statutory demands in Australia, not legal advice for your company.
What a statutory demand is
A statutory demand is a formal written demand under s 459E of the Corporations Act. A creditor can serve one on a company for a debt, or several debts, that are due and payable and total at least the statutory minimum, currently $4,000 (s 9 and Corporations Regulations 2001 reg 5.4.01AAA(1)(b)).
The demand must be in writing, in the prescribed form, signed by or for the creditor, and must state the amount. Unless the debt is a court judgment, it must come with an affidavit verifying the debt is due and payable (s 459E(2) and (3)). The creditor can be a supplier, a landlord, a builder, a finance company, or the ATO for a tax debt.
The demand is not a court case yet. It is the step a creditor takes so that, if the company ignores it, the creditor can go to court and ask for the company to be wound up (put into liquidation) without first proving the company is insolvent.
This only applies to companies. If you are a sole trader or a creditor is chasing you personally, the equivalent document is a bankruptcy notice, which has its own rules: see AFSA: I've been served with a bankruptcy notice.
When the 21 days start
The clock runs from service on the company, so the service date is the first thing to pin down. Under s 109X, a document can be served on a company by leaving it at or posting it to the registered office, or by handing a copy to a director who lives in Australia.
If it was left at the office or handed to a director, the service date is that day. If it was posted, the Acts Interpretation Act s 29 treats it as served when the letter would arrive in the ordinary course of post, unless the contrary is proved. You may not know exactly when that was. Count from the earliest date it could have arrived, not the day someone opened it.
Make sure your registered office address on the ASIC register is one where mail is actually read. If the registered office is still an old accountant's address, a demand posted there still starts the clock.
The deadline cannot be stretched
Section 459G(2) says an application to set aside "may only be made" within the 21 days after service, and s 459G(3) says it counts only if, within that period, the affidavit is filed and copies of the application and affidavit are served on the creditor. Section 459G contains no power to extend that period. Treat it as absolute: a strong case filed or served a day late is a case you may not get to run.
Once you have applied in time, the court can extend the time for compliance (s 459F(2)(a)(i)). If the court dismisses the application without setting a different period, the company has until 7 days after the application is finally decided to comply (s 459F(2)(a)(ii)).
Grounds to set the demand aside
A genuine dispute about the debt (s 459H(1)(a)). The company genuinely disputes that the money is owed, or disputes how much is owed. For example, the work was defective, the goods were never delivered, or the invoice charges for things outside the contract. The test in s 459H is whether the dispute is genuine, not whether the company will win it. A complaint invented after the demand arrived, with nothing on paper, is unlikely to pass.
An offsetting claim (s 459H(1)(b)). The company has its own genuine claim against the creditor, by way of counterclaim, set-off or cross-demand. It does not need to come from the same deal (s 459H(5)).
The court takes the amount not genuinely disputed, subtracts any offsetting claim, and if what is left is less than $4,000 it must set the demand aside (s 459H(2) and (3)). If $4,000 or more is left, it can vary the demand down to that figure instead (s 459H(4)).
A defect, or some other reason (s 459J). A mistake in the demand (wrong company name, wrong amount, missing affidavit) only gets it set aside if leaving it in place would cause substantial injustice (s 459J(1)(a) and (2)). The court can also set it aside for "some other reason" (s 459J(1)(b)).
Put every ground and the key evidence in the affidavit you file within the 21 days. If a creditor later applies to wind up the company, the company cannot, without the court's permission, rely on a ground it used or could have used to challenge the demand (s 459S). Evidence of the dispute (emails, defect photos, the contract, earlier complaints) matters more than argument.
Where to file, and the fee
An application to set aside can be made to the Federal Court of Australia or the Supreme Court of your state or territory (s 58AA, which defines "the Court" for the Act).
From 1 July 2026, the Federal Court fee for a company to file the application is $5,255 (Federal Court and Federal Circuit and Family Court Regulations 2022, Schedule 1 item 101, corporation rate). Federal Court fees are indexed each 1 July (reg 2.20). Supreme Court fees are set by each state and territory and differ. If the court sets the demand aside, it can order the creditor to pay the company's costs (s 459N).
What happens if the 21 days pass
If the company has not paid, secured or compounded the debt and has not applied in time, it is taken to have failed to comply (s 459F(1)). For the next 3 months, a court hearing an application to wind up the company must presume the company is insolvent (s 459C(2)(a)). The company can try to prove it is solvent, but that is a much harder fight (s 459C(3)).
The creditor can then file a winding up application, attaching the demand and proof of service (s 459Q). The ATO says that if a company does not comply with its statutory demand, it may use that as evidence of insolvency and apply to the Federal Court to wind up the company.
Paying after day 21 is still worth doing. But once a winding up application is filed, the creditor must serve it on the company and have notice of it published (s 465A), and the court can substitute another creditor as the applicant if the first one drops out (s 465B).
If the money really is owed
Pay it, or agree terms in writing. The demand can be satisfied by paying, or by securing or compounding the debt to the creditor's reasonable satisfaction (s 459E(2)(c)). If you agree a payment plan, get the creditor to confirm in writing, before day 21, that it satisfies the demand and that it will not apply to wind up the company while the plan is kept.
ATO debts. The ATO says you may be able to set up a payment plan online through Online services for business if the company owes $200,000 or less, and otherwise you need to phone the ATO (ATO: Setting up a payment plan). Separately, directors can become personally liable for the company's unpaid PAYG withholding, GST and super guarantee charge through director penalty notices (ATO: Firmer action we may take). For the employee side of unpaid super, see Unpaid super and Payday Super.
Small business restructuring. A company with total liabilities of no more than $1 million can appoint a restructuring practitioner, who must be a registered liquidator, while the directors keep running the business. During the restructuring, unsecured creditors cannot start or continue claims without consent or court permission, and a court is to adjourn a winding up application if continuing the restructuring is in the company's interests. See ASIC: Small business restructuring for eligibility, including having employee entitlements paid and tax lodgements up to date.
The Small Business Ombudsman. The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) helps small businesses resolve disputes with other businesses and government agencies, including access to low-cost legal advice and mediation. Its information line is 1300 650 460: ASBFEO: How we help. Contacting it does not stop the 21 days.
Worked example
On Monday 12 October 2026, a process server hands a statutory demand to Mei, the sole director of a small joinery company. A supplier claims $18,500 for timber. Mei says $11,000 of it was for a delivery that arrived water-damaged and was sent back, and she has the emails.
- Service was on 12 October, so day 1 is Tuesday 13 October and day 21 is Monday 2 November 2026.
- Mei's application and affidavit, setting out the returned delivery and attaching the emails, are filed in the Federal Court on Wednesday 28 October 2026. Copies are served on the supplier at the address on the demand the same day. That is within time.
- If the court accepts the dispute, the undisputed amount is $7,500. That is above $4,000, so the court can vary the demand down to that figure rather than set it aside (s 459H(4)). Mei then pays the undisputed part.
- If instead the court dismissed the application on Friday 4 December 2026 without setting another date, the company would have until Friday 11 December 2026 to comply (s 459F(2)(a)(ii)).
Had Mei filed on 2 November but only served the supplier on 3 November, the application would have been out of time.
Related guides
If the creditor's collector is ringing at all hours or making threats, see Debt collector harassment. If the debt is many years old, see Statute-barred debts.