Last updated: September 2, 2026
Statutory Demands in Australia: How to Respond, and How to Set One Aside
A creditor’s statutory demand is a formal document issued under section 459E of the Corporations Act 2001 (Cth) requiring a company to pay a debt of at least $4,000 within 21 days. If the company does not pay, reach an agreement, or apply to set the demand aside within those 21 days, it is presumed insolvent and the creditor can apply to wind it up. The 21-day period cannot be extended by a court. If you have received one, the date on it is the most important fact about it.
Key Takeaways
- The statutory minimum debt is $4,000.
- You have 21 days from service to pay, settle, or apply to set the demand aside.
- That 21 days cannot be extended. Courts have no power to extend it, and missing it by a day is fatal to the application.
- Failing to comply creates a presumption of insolvency that lasts 3 months, during which the creditor can apply to wind the company up.
- A demand must be accompanied by an affidavit verifying the debt unless it is a judgment debt.
- If there is a genuine dispute about the debt, or an offsetting claim, the demand can usually be set aside.
How much must the debt be?
At least $4,000. That threshold was raised from $2,000 in 2021. The demand must specify the debt and its amount, and if it covers several debts it must specify the total. A demand for less than the statutory minimum is invalid.
How long do I have to respond to a statutory demand?
Twenty-one days from the date you were served — not from the date on the document, and not from the date you happened to read it. Within that period a company must do one of three things: pay the debt, reach a genuine agreement with the creditor about it, or apply to the court to set the demand aside.
The 21-day period is the single most important feature of this area of law, because it cannot be extended. The High Court confirmed in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2008] HCA 9 that the court has no power to extend the time for making a set-aside application. An application filed on day 22 will fail regardless of how strong the underlying dispute is. Service of the supporting affidavit is subject to the same deadline.
What happens if I ignore it?
The company is presumed insolvent. The creditor can then apply to the court to wind it up, and the company loses the ability to argue in that proceeding that the debt was disputed — it has to seek leave to raise solvency at all, and that is difficult. The presumption operates for three months.
In practice, ignoring a statutory demand converts a debt argument into an insolvency proceeding, which is dramatically more expensive and puts directors’ duties and potential insolvent trading exposure into play. If you are facing this situation, our corporate insolvency and bankruptcy team can advise on your options.
On what grounds can a statutory demand be set aside?
There are four, and in practice the first two do most of the work.
- Genuine dispute about the debt — section 459H. The company does not have to prove it will win. It has to show a plausible contention requiring investigation. The threshold is deliberately low, because the demand procedure is not meant to resolve real disputes.
- Offsetting claim — also section 459H. A genuine claim the company has against the creditor, whether by counterclaim, set-off or cross-demand, which reduces the amount below the statutory minimum.
- Defect causing substantial injustice — section 459J(1)(a). A defect in the demand or the affidavit that would cause substantial injustice unless the demand is set aside. Minor misdescriptions usually are not enough on their own.
- Some other reason — section 459J(1)(b). A residual discretion, used where the demand is an abuse of process or the debt is not due and payable.
What has to accompany the demand?
Unless the debt is a judgment debt, the demand must be accompanied by an affidavit verifying that the debt is due and payable, sworn by the creditor or someone with authority. Defects in that affidavit are a common basis for a set-aside application — for example where it is sworn by someone without knowledge, is not properly sworn, or does not verify the debt as at the date of the demand.
How must a statutory demand be served?
On a company, service is usually effected by leaving it at, or posting it to, the company’s registered office as recorded with ASIC. This catches companies out regularly: a demand served on a registered office that is an old accountant’s address is still validly served, and the 21 days still run. Keeping the registered office current is a practical insolvency safeguard.
I’m the creditor. Should I issue a statutory demand?
It is a powerful tool where the debt is clear, due, payable and undisputed. It is the wrong tool where you know there is a genuine dispute — issuing one anyway usually ends in the demand being set aside with costs against you, and it can amount to an abuse of process. A letter of demand first is almost always the better sequence, and it is a fixed $350 for subscription clients. For ongoing recovery, see our debt recovery service.
What does it cost to respond?
Far less than the winding-up application it prevents. Because the 21-day deadline is absolute, the cost of getting advice immediately is small relative to the cost of being a day late. We will scope the work and give you an estimate at the first conversation. Our corporate insolvency and bankruptcy lawyers can act quickly once the clock is running.
Frequently Asked Questions
Can the 21 days be extended?
No. The court has no power to extend the period for applying to set aside a statutory demand. This was settled by the High Court in Aussie Vic Plant Hire v Esanda Finance [2008] HCA 9.
What is the minimum debt for a statutory demand?
$4,000, raised from $2,000 in 2021.
Does a statutory demand mean my company is insolvent?
No. It means a creditor says a debt is owed. Insolvency is only presumed if you fail to respond within 21 days.
Can a statutory demand be served on an individual?
No. Statutory demands under the Corporations Act apply to companies. The equivalent process for individuals is a bankruptcy notice under the Bankruptcy Act 1966 (Cth).
What if I partly dispute the debt?
If the genuinely disputed portion or an offsetting claim brings the admitted amount below $4,000, the demand can generally be set aside. If not, the court may vary the demand down to the admitted amount.
How long does the presumption of insolvency last?
Three months from the end of the 21-day compliance period.
Do I need to file an affidavit to set aside a demand?
Yes. The application must be supported by an affidavit, and both the application and the supporting affidavit must be filed and served within the 21 days.
What if the demand has the wrong company name or amount?
It may be a defect. Whether it is enough to set the demand aside depends on whether it would cause substantial injustice. Minor errors often are not sufficient on their own — get it assessed rather than assuming.
