How to Set Aside a Statutory Demand in Australia (2026): S 459G Deadlines, Genuine Dispute & Offsetting Claims

To set aside a statutory demand in Australia you have 21 days from the date of service to file and serve an application under section 459G of the Corporations Act 2001 (Cth), miss that window and the consequences can be severe. A statutory demand is one of the most powerful debt-recovery tools available to creditors because it can trigger a presumption of insolvency if left unaddressed. For company directors, CFOs and in-house counsel in 2026, the courts continue to apply the 21-day period stringently, with careful scrutiny of affidavit form, proof of service and the grounds relied upon. This practitioner playbook walks you through the grounds, the procedure, the affidavit requirements and the strategic choices you must make immediately.

Quick summary and immediate action checklist

A statutory demand issued under section 459E of the Corporations Act 2001 (Cth) is a formal written demand requiring a company to pay a debt that is at least the statutory minimum amount within 21 days. If the company does not pay, secure or compound the debt to the creditor’s reasonable satisfaction, or does not apply to set aside the demand within that time, the creditor can rely on a presumption that the company is insolvent and apply to wind it up. The 21-day period runs from the date the demand is served, not from the date you first read it, so the clock may already be running further than you think.

The single most important point about how to set aside a statutory demand in Australia is that the deadline is strict. Courts have held that the 21-day period cannot be extended once it has expired. That makes your first 48 hours critical.

What is a statutory demand and what are the legal consequences?

A statutory demand is a creditor’s formal request for payment of a debt that is due and payable by a company. Under section 459E of the Corporations Act 2001 (Cth), the demand must be in the prescribed form, specify the debt and its amount, require payment within 21 days of service, and, where the debt is not a judgment debt, be accompanied by a supporting affidavit verifying that the debt is due and payable. The debt (or the total of two or more debts) must be at least the “statutory minimum” prescribed under the Act.

The gravity of a statutory demand lies in what happens if the company does nothing. Failure to comply within 21 days can create a statutory presumption of insolvency. That presumption is a springboard: it allows the creditor to apply to the court to wind the company up without first proving, from first principles, that the company cannot pay its debts generally. In practical terms, one unpaid demand can put an otherwise trading company at risk of liquidation.

This is why the ability to set aside a statutory demand in Australia matters so much. Setting the demand aside removes the presumption of insolvency, neutralising the creditor’s fastest route to a winding-up order. The Australian Securities and Investments Commission (ASIC) publishes practical guidance on how statutory demands operate and the insolvency consequences that flow from them, and that guidance underscores how seriously the regime should be treated.

Grounds to set aside a statutory demand

Section 459G gives the company the right to apply, and the substantive grounds are found chiefly in sections 459H and 459J of the Corporations Act 2001 (Cth). Broadly, there are three main categories of ground, plus a residual discretionary basis.

• Genuine dispute about the debt. The court may set aside the demand if it is satisfied there is a genuine dispute between the company and the creditor about the existence or amount of the debt.
• Offsetting claim. The company may have a counterclaim, set-off or cross-demand against the creditor. If the offsetting claim reduces the debt below the statutory minimum, the demand can be set aside; otherwise the court may vary the amount.
• Defect in the demand causing substantial injustice. Where there is a defect in the demand and substantial injustice would be caused unless the demand is set aside, the court may set it aside.
• Some other reason. The court retains a discretion to set aside a demand for “some other reason”, for example, where the demand is an abuse of process.

Quick summary of the tests

For genuine disputes and offsetting claims, the court does not resolve the dispute at this stage. It asks only whether there is a plausible, seriously arguable case that requires investigation, the threshold is deliberately low but it is not nil. For defects, the applicant must show both a defect and that substantial injustice would result if the demand stood. Understanding which ground fits your circumstances is the foundation of any successful attempt to set aside a statutory demand in Australia.

Genuine dispute and offsetting claims, legal tests and examples

The genuine dispute and offsetting claim grounds are the workhorses of most section 459G applications, so it is worth understanding them in depth.

Definition and test for a genuine dispute

A genuine dispute is one that is bona fide and truly exists in fact. The dispute must be real and not spurious, hypothetical, illusory or misconceived. The company does not have to prove that it will ultimately win, it only has to show that there is a genuine question to be tried. Courts have repeatedly described the threshold as analogous to the test for resisting summary judgment: is there a serious question to be tried or a plausible contention requiring investigation? A bare assertion that the debt is disputed, without any supporting material, will not suffice. Equally, the court will not conduct a mini-trial on the merits.

An offsetting claim is a genuine claim the company has against the creditor by way of counterclaim, set-off or cross-demand, even if it arises out of different circumstances from the debt itself. If the offsetting claim, when netted against the demanded debt, brings the “substantiated amount” below the statutory minimum, the demand may be set aside. Where the netting leaves an amount above the threshold, the court can vary the demand down to that figure rather than set it aside entirely.

Examples of acceptable evidence

The strength of a section 459G application usually turns on the quality of the documentary evidence, not the eloquence of the argument. Persuasive material typically includes:

• Contracts and variations. Where the dispute concerns the scope of works or services, the underlying agreement and any variation records are essential.
• Correspondence. Emails and letters in which the debt was queried, invoices were rejected, or defects were raised at the time, contemporaneous complaints carry far more weight than after-the-fact objections.
• Invoices and statements. To demonstrate miscalculation, double-counting or amounts already paid.
• Bank and payment records. To prove partial or full payment, or to substantiate a cross-claim for overpayment.
• Expert or quality reports. Where the dispute involves defective goods or workmanship supporting an offsetting damages claim.

Drafting a short pleading of the dispute

Although a section 459G application is decided on affidavit evidence rather than pleadings, the affidavit should set out the dispute with the clarity of a pleaded case. State the basis of the debt as claimed by the creditor, then identify precisely why it is disputed, for example, “the works the subject of invoice 1042 were never completed; the company gave written notice of the defects on [date] (Exhibit JD-3)”. A crisp, particularised narrative helps the court see the genuine question to be tried.

When a cross-claim is insufficient

Not every grievance qualifies. An offsetting claim that is fanciful, unquantified, or wholly unsupported by evidence will fail. A claim that has already been finally determined against the company, or that is plainly statute-barred, is unlikely to assist. Similarly, a vague assertion of “damages to be quantified” with no attempt to estimate the amount gives the court nothing to weigh against the debt. The lesson for anyone seeking to set aside a statutory demand in Australia on this ground is to quantify the offsetting claim, however roughly, and to support the figure with material.

How to file a s 459G application, step-by-step (day 0 to 21)

The section 459G application is a two-limbed exercise. Within 21 days of service you must both file the originating process seeking to set aside the demand and a supporting affidavit, and you must serve a copy of the application and affidavit on the person who served the demand. All of this must happen inside the 21-day window. Courts have consistently held there is no power to extend the period once it has expired.

Required forms and how to file

An application to set aside a statutory demand is made to a court with jurisdiction under the Corporations Act 2001 (Cth), in practice, the Federal Court of Australia or the Supreme Court of a State or Territory. You commence proceedings by filing an originating process in the form prescribed by the applicable Corporations Rules, together with the supporting affidavit, and paying the filing fee set by the relevant court. Each court registry publishes its own filing procedures and practice notes; for example, the Supreme Court of New South Wales publishes practice notes governing corporations proceedings that specify listing and case management expectations.

Check the registry of the court in which you intend to file before lodging, as fees and procedures change.

Affidavit requirements

The supporting affidavit is the heart of the application. It must be filed within the 21-day period, an affidavit that merely promises to provide grounds later, or that omits the substance of the dispute, exposes the application to failure. The affidavit should verify service of the demand, identify the debt claimed, set out the facts giving rise to the genuine dispute or offsetting claim, exhibit the supporting documents, and quantify any offset. Section 459G requires the application to be “supported by an affidavit”, and courts continue to scrutinise whether that affidavit adequately raises the grounds relied upon within time.

Service, proof of service and the affidavit of service

Serving the creditor within time is as important as filing. Serve the application and affidavit in accordance with the rules, commonly at the creditor’s address for service, its registered office, or on the solicitor named in the demand. Then prepare an affidavit of service recording precisely how, when and where service was effected, and retain proof (courier receipts, registered post records, email confirmations). Defective or unproven service can be fatal, so treat it with the same rigour as the substantive grounds.

Seeking an urgent or interlocutory listing

Because the timetable is tight, you may need to approach the registry for an early return date, particularly if the creditor has already flagged an intention to apply for a winding-up order. Where genuine urgency exists, for example, a threatened winding-up filing or an imminent event of default triggered by the demand, you can request an urgent listing and, in appropriate cases, seek interlocutory relief to preserve the status quo. Urgent applications require candour with the court and a clear explanation of why the matter cannot await the ordinary list.

The practical message is to work backwards from Day 21 and build in a buffer. A well-run process aims to complete filing and service several days before expiry, leaving contingency for registry queries or service difficulties.

Affidavit checklist and sample paragraphs

The affidavit does the heavy lifting in any bid to set aside a statutory demand in Australia. Use the checklist below as a drafting framework, and remember that the sample paragraphs are illustrative only and must be adapted to your facts and verified by a lawyer.

• Deponent identity and authority. Who you are, your position in the company, and your authority to swear the affidavit.
• Service of the demand. When, how and where the demand was served, and when the company became aware of it.
• The debt as claimed. A statement of what the creditor says is owed and on what basis.
• Facts refuting or disputing the debt. The narrative establishing the genuine dispute.
• Particulars of any offsetting claim. The nature, basis and quantum of the company’s cross-claim or set-off.
• Calculation of offsets. A clear arithmetic showing the net position and whether it falls below the statutory minimum.
• Exhibits. Invoices, contracts, correspondence, bank records and reports, each properly identified.
• Verification and jurat. The formal verification of truth and the jurat in the correct form.

Sample paragraphs (for guidance only, adapt and verify):

• Sample 1, identity. “I am a director of the applicant company and am authorised to make this affidavit on its behalf. The facts and matters deposed to are within my own knowledge except where otherwise stated.”
• Sample 2, service. “On [date] a statutory demand dated [date] was left at the company’s registered office. A copy of the demand is exhibited and marked [JD-1].”
• Sample 3, the debt claimed. “The demand claims the sum of $[amount] said to be owing under invoice [number] for goods supplied on [date].”
• Sample 4, genuine dispute. “The company disputes that any amount is owing. The goods delivered on [date] were defective, as the company notified the creditor in writing on [date] (Exhibit [JD-2]).”
• Sample 5, offsetting claim. “Further, the company has an offsetting claim against the creditor for damages arising from the defective goods, estimated at not less than $[amount], particulars of which appear at [JD-3].”
• Sample 6, net calculation. “After allowing for the offsetting claim, the substantiated amount of the debt is less than the statutory minimum, and the demand should be set aside.”

Defects in a statutory demand, common issues and quick wins

Even where the debt is genuinely owed, a defect in the demand may provide a basis to set it aside, provided the defect causes substantial injustice. Common defects worth examining include:

• Wrong creditor. The demand names an entity other than the true creditor, or misidentifies the party entitled to the debt.
• Miscalculated amount. The amount claimed is overstated, includes sums already paid, or double-counts interest or charges.
• Insufficient particulars. The demand fails to describe the debt with enough clarity for the company to identify what is claimed.
• Non-compliant form. The demand does not comply with the prescribed form or omits a required element under section 459E.
• Service defects. The demand was not served at the registered office or in a manner authorised by the Act.

Note that a mere formal irregularity that causes no substantial injustice will not, on its own, warrant setting the demand aside. The applicant must connect the defect to substantial injustice. Where a genuine dispute or offsetting claim also exists, defects are usually pleaded as an additional, supporting ground rather than the primary one.

What if you miss the 21-day deadline?

Missing the deadline is the scenario every director fears. Because the 21-day period cannot be extended after it expires, the court cannot simply revive the right to apply. Once the window closes and the demand has not been complied with, the presumption of insolvency may arise and the creditor may apply to wind the company up.

The available remedies are limited and often difficult:

• Negotiate with the creditor. The most practical option is to reach the creditor before any winding-up application is filed and seek payment terms, security, or withdrawal of the demand by consent.
• Pay, secure or compound the debt. Satisfying the demand removes the presumption of insolvency and forecloses the winding-up route based on the demand.
• Rebut the presumption in the winding-up proceeding. If a winding-up application is filed, the company can lead solvency evidence to rebut the presumption, though this is a heavier evidentiary burden than defeating the demand at the section 459G stage, and there are restrictions on the matters a company may rely on at that stage without the court’s leave.
• Urgent injunctive relief. In rare cases involving abuse of process, urgent injunctive relief may be sought to restrain the creditor, but this is exceptional and fact-dependent.

The overriding lesson is prevention: a timely, well-prepared application is worth far more than any after-the-event remedy, which is precisely why the disciplined approach to set aside a statutory demand in Australia set out above matters so much.

If set-aside fails: defending a winding-up application

If the section 459G application is unsuccessful, or the deadline has passed, attention shifts to defending any winding-up application. Practical defensive steps include contesting jurisdiction or standing, adducing evidence of the company’s solvency to rebut the presumption, offering undertakings to the court about the conduct of the business, and seeking a stay or adjournment to allow a restructure, refinancing or settlement to complete. Costs considerations also loom large, because an unsuccessful defence to a winding-up application can generate significant exposure.

Comparison table: set aside, comply, or negotiate

Choosing the right response is a strategic decision that depends on the strength of your position, your cash position, and the commercial relationship with the creditor. The table below compares the three principal paths.

Critically, negotiating does not stop the 21-day clock. If talks are ongoing but unresolved as the deadline approaches, prepare and file the section 459G application anyway to preserve your position, then continue the negotiation.

Costs, security and undertakings

Costs commonly follow the event in section 459G applications, so an unsuccessful attempt to set aside can expose the company to the creditor’s costs on top of the underlying debt. Conversely, a successful application will usually see the creditor ordered to pay the company’s costs, subject to the court’s discretion. Where the applicant company’s financial position is uncertain, a creditor may seek an order for security for costs before the application proceeds. Companies contemplating an application should also weigh whether to offer undertakings, for example, to maintain the business in the ordinary course or to preserve particular assets, where these might support an urgent or interlocutory application.

Ringfencing assets and demonstrating good faith can improve the court’s confidence in the company’s proposals.

Practical annexures and templates

To support an application to set aside a statutory demand in Australia, the following practical resources are useful to have on hand:

• An affidavit checklist covering identity, service, dispute, offsets and exhibits.
• Sample affidavit paragraphs adaptable to genuine dispute and offsetting claim grounds.
• A model section 459G originating process reference (aligned to the applicable Corporations Rules).
• A day-by-day timeline template mapped to the 21-day period.

All templates are for guidance only and must be adapted to your circumstances and reviewed by a qualified lawyer before use.

Conclusion and next steps

The decision to set aside a statutory demand in Australia is one of the most time-critical you will face as a director or adviser. Everything turns on the 21-day period, the quality of your supporting affidavit, and choosing the right ground, genuine dispute, offsetting claim or defect. Act within 48 hours: preserve the demand, take legal advice, and begin assembling the evidence for your affidavit. If the debt is genuinely owed and payable, comply or negotiate before the clock runs out; if it is genuinely disputed, prepare and file your section 459G application promptly and serve it properly.

For tailored guidance on how to set aside a statutory demand in Australia, or on defending a subsequent winding-up application, contact a commercial litigation specialist through Global Law Experts. This article is general information and not legal advice; obtain advice specific to your circumstances before acting.

Sources

1. Corporations Act 2001 (Cth), Federal Register of Legislation
2. Australian Securities and Investments Commission (ASIC)
3. AustLII, Australian legal case law database
4. Federal Court of Australia
5. Law Council of Australia
6. Australian Financial Security Authority (AFSA)
7. Supreme Court of New South Wales