How to Reply to a Statutory Demand in Australia (21‑day Rule, S 459G, Genuine Dispute)

Last updated: 24 May 2026

If your company has been served with a creditor’s statutory demand for payment of debt, you have exactly 21 days to act. Understanding how to reply to a statutory demand is critical: the clock starts the moment the document reaches your registered office or an Australian-resident director, and missing the deadline creates a legal presumption that your company is insolvent. Under the Corporations Act 2001 (Cth), you have three options, pay the debt in full, negotiate a resolution with the creditor, or file an application to set aside the demand under s 459G.

This guide walks company directors, CFOs and in-house counsel through every step of that 21‑day window, from preserving evidence on Day 0 to filing a set‑aside application before the deadline expires. Whether your company genuinely disputes the debt, holds an offsetting claim, or has identified defects in the demand itself, the practical checklists, affidavit guidance and timeline below will help you protect your business from a winding‑up application.

What Is a Statutory Demand in Australia, the Essentials

A statutory demand is a formal written notice served by a creditor on a company requiring payment of an outstanding debt. It is not a court order, but it triggers serious legal consequences if ignored. The demand is the first procedural step a creditor must take before applying to wind up a company on the grounds of insolvency under the Corporations Act.

Legal Basis: Corporations Act s 459E and s 459G

Section 459E of the Corporations Act 2001 (Cth) sets out the requirements for a valid statutory demand. The demand must be in writing, specify the debt (or debts) and the total amount owing, and require the company to comply within 21 days of service. If the creditor does not already hold a court judgment for the debt, the demand must be accompanied by a verifying affidavit. Section 459G then provides the company’s pathway to challenge the demand by applying to the court to have it set aside, provided the application is filed and served within the same 21‑day compliance period.

Minimum Amount and Form 509H

The statutory demand form prescribed under the Corporations Regulations is Form 509H. A creditor can only issue a valid demand where the debt (or aggregate of debts) totals at least $4,000, a threshold that was increased on 1 July 2021. The form must correctly identify the debtor company, state the precise amount owed, and include the prescribed wording requiring compliance within 21 days. Any material departure from these requirements may itself be grounds for setting aside the demand.

How to Reply to a Statutory Demand, Your Immediate 21‑Day Checklist

Time is the most valuable resource you have after receiving a statutory demand. The following checklist breaks the 21‑day compliance period into manageable action blocks. Treat it as an emergency triage protocol.

Day 0: On Service

The instant the demand arrives, record the exact date and time of service. Photograph or scan every page of the demand and accompanying affidavit. Confirm whether the document was delivered to the company’s registered office address (as recorded with ASIC) or personally to an Australian‑resident director. Check the company name, ACN and debt amount against your own records. Any discrepancy could be significant later. Do not contact the creditor before you have preserved this evidence and taken preliminary legal advice.

Days 1–3: Contact the Creditor

If the debt is admitted and the company can pay, the simplest response is to pay in full within the 21‑day window and obtain written confirmation of receipt. If cash flow is tight, contact the creditor promptly to negotiate a payment plan. Keep all communications in writing. A sample opening email might read:

“We acknowledge receipt of your statutory demand dated [date]. We are reviewing the amount claimed and wish to discuss a resolution. Without prejudice to our rights, we propose [payment in instalments / partial payment of $X by Y date]. Please confirm whether this is acceptable so that we may formalise the arrangement.”

Any agreement reached should be documented in a signed settlement deed or exchange of correspondence. Industry observers note that creditors frequently agree to withdraw a statutory demand where a realistic payment plan is offered promptly, because the alternative, contested court proceedings, carries its own costs and delays.

Days 4–14: Gather Evidence for a Potential Set‑Aside

If the debt is genuinely disputed, or you have identified defects in the demand, these middle days are critical for building your case. Collate every document relevant to the alleged debt: contracts, purchase orders, invoices, credit notes, delivery dockets, bank statements, email correspondence and any reconciliation records. Organise them chronologically and flag the specific items that demonstrate why the claimed amount is wrong, why the debt is not yet due, or why a genuine dispute exists. Begin drafting the supporting affidavit, the court will rely heavily on this document, and it must be precise and supported by exhibits.

Days 14–21: File the Application (If Not Resolved)

If negotiation fails and you intend to contest, your s 459G application must be both filed with the court and served on the creditor within the 21‑day period. There is no power to extend this deadline. Engage your solicitor to finalise the originating process, supporting affidavit and evidence bundle. Confirm whether to file in the relevant State or Territory Supreme Court or in the Federal Court of Australia, and check local registry hours and filing requirements. Courts have consistently refused to excuse even a single day of delay.

Assessing Grounds to Set Aside, s 459G Explained

Setting aside a statutory demand under s 459G of the Corporations Act is the primary defence available to a company that disputes the underlying debt. There are three recognised categories of grounds.

Genuine Dispute Over the Debt

Under s 459H(1)(a), the court may set aside a statutory demand if satisfied there is a genuine dispute about the existence or amount of the debt. The threshold is not high, the company does not need to prove its case on the balance of probabilities at this stage, but neither will a bare assertion suffice. The court applies what is often described as a “plausible contention requiring investigation” test. The company must point to specific evidence: a contract term that supports a different interpretation of the amount owing, correspondence showing the debt was disputed before the demand was issued, credit notes or reconciliations that contradict the creditor’s figure, or delivery records showing goods were defective or short-shipped.

The practical effect of this standard is that courts will look through the affidavit evidence to determine whether the dispute is real and not merely fabricated for the purpose of defeating the demand. Annexing the relevant documents to your affidavit, not just describing them, is essential. A genuine dispute about even a portion of the claimed amount can be enough to set aside the entire demand if the residual amount falls below the $4,000 statutory minimum or if the demand cannot be severed.

Sample affidavit language that courts find persuasive typically follows this pattern: “The creditor claims $52,000 for goods delivered under Invoice No. 1234. I dispute this amount. Annexed hereto and marked ‘A’ is a credit note dated [date] for $18,000 issued by the creditor acknowledging defective items. The true amount owing, if any, is no more than $34,000, and this figure is itself disputed because…”

Offsetting Claim or Cross‑Demand

Section 459H(1)(b) provides a separate ground: the company has an offsetting claim against the creditor. An offsetting claim is a genuine counterclaim, set-off or cross‑demand that the company could bring against the creditor in its own right. The claim must be quantifiable and have reasonable prospects of success. For example, if the creditor supplied faulty equipment causing production losses, and you have evidence of those losses (repair invoices, expert reports, lost‑revenue calculations), this can reduce the effective amount of the statutory demand below the statutory minimum, or eliminate it entirely, triggering a set‑aside. The court will assess whether the offsetting claim is genuine using a similar threshold to the genuine dispute test.

Defects in the Demand Itself

Even where the underlying debt is not contested, a statutory demand may be set aside under s 459J if there is a defect in the demand that would cause “substantial injustice” if the demand were not set aside, or if there is “some other reason” to do so. Common defects include:

• Wrong company name or ACN. If the demand names a different entity or includes an incorrect ACN, it may be fatally flawed.
• Incorrect amount. Overstating the debt, including amounts not yet due, or double-counting invoices.
• Missing verifying affidavit. Where no court judgment exists for the debt, the demand must be accompanied by an affidavit verifying that the debt is due and payable. Failure to annex one is a serious defect.
• Improper service. The demand must be served at the company’s registered office or on an Australian-resident director. Service by email alone, or delivery to an old office address, may be challenged.
• Non-compliance with Form 509H. Material departures from the prescribed statutory demand form, such as omitting the required compliance wording, can render the demand defective.

How to Prepare a s 459G Application, Practical Steps and Affidavit Pitfalls

If you have identified viable grounds, the next step is preparing and filing the application. Precision matters: courts routinely dismiss applications that are poorly drafted, filed late, or unsupported by adequate evidence.

Court Forms, Filing and Service

Applications to set aside a statutory demand can be filed in either the Federal Court of Australia or the Supreme Court of the relevant State or Territory. The Federal Court’s Corporations Information Sheet 1 outlines the procedural requirements in detail. Your application must include an originating process (or interlocutory application, depending on local rules), the supporting affidavit, and copies of the statutory demand and accompanying documents. Both the application and the affidavit must be filed and served on the creditor within the 21‑day period. Filing alone is not sufficient, service must also be completed within the deadline.

Affidavit Structure and Sample Paragraphs

The supporting affidavit is the centrepiece of your application. It should follow a clear, logical structure:

1. Identify the parties and the demand. State the deponent’s role in the company, annex the statutory demand (marked as Exhibit A), and confirm the date of service.
2. Explain the genuine dispute or offsetting claim. Set out the factual basis for the dispute in chronological order. Reference specific documents, do not merely assert that a dispute exists. Each key document should be annexed as a numbered exhibit.
3. Address any defects. If you are also relying on formal defects, identify them specifically and explain the substantial injustice that would result.
4. Exhibits list. Provide a comprehensive schedule of exhibits cross-referenced to the affidavit paragraphs.

Common affidavit mistakes that lose set‑aside applications:

• Relying on hearsay statements without annexing the underlying documents.
• Making legal arguments in the affidavit rather than stating facts, argument belongs in written submissions.
• Inconsistent dates or amounts between the affidavit narrative and the exhibited documents.
• Failing to address the formal requirements of service and jurisdiction.
• Omitting documents that the creditor is likely to produce, creating the impression of selective disclosure.

Evidence Bundle Checklist

Ensure your evidence bundle includes the following documents (where applicable):

• The statutory demand and accompanying affidavit (as served)
• The underlying contract, purchase order or terms of trade
• All relevant invoices, credit notes and remittance advices
• Delivery dockets, proof of shipment or acceptance records
• Email or letter correspondence showing the dispute was raised before the demand
• Bank statements or payment records relevant to the claimed debt
• Any expert reports, defect reports or loss quantifications (for offsetting claims)
• ASIC company extract confirming the registered office address (for service challenges)

Creditor Tactics and Common Creditor Mistakes

Understanding the creditor’s playbook helps you respond strategically. Experienced creditors issue statutory demands rapidly, sometimes within days of a debt falling overdue, to start the 21‑day clock running before the debtor can organise a defence. The demand is often accompanied by a carefully drafted affidavit designed to present the debt as straightforward and undisputed.

However, creditors frequently make procedural errors that hand the debtor a viable set‑aside argument. The most common mistakes include serving the demand at a former registered office rather than the current one recorded with ASIC, misstating the debtor company’s name or ACN, claiming an amount that includes disputed or contingent components, and failing to annex a verifying affidavit when no court judgment has been obtained. In some cases, the creditor’s own affidavit contains admissions or inconsistencies that undermine the claim that the debt is undisputed.

Where a creditor has made a material error, the likely practical effect is that the debtor can apply to set aside the demand on the basis of the defect alone, without needing to establish a genuine dispute about the debt itself. Industry observers expect that the increasing use of template-driven demand preparation, particularly by non-specialist debt recovery firms, will continue to produce a steady stream of defective demands.

State Practice Notes, NSW, Victoria, QLD and WA

While the Corporations Act is a Commonwealth statute and applies uniformly across Australia, the court in which you file a s 459G application may have its own practice notes and registry procedures.

• Statutory demand NSW. The Supreme Court of New South Wales handles a large volume of statutory demand matters. Applications are typically filed in the Corporations List. Check the Supreme Court’s current practice notes for filing requirements, return dates and affidavit formatting.
• Statutory demand Victoria. The Supreme Court of Victoria’s Commercial Court manages statutory demand applications. Practitioners should consult the Court’s Practice Court procedures for urgent listing availability.
• Queensland and Western Australia. The respective Supreme Courts handle these applications under their general corporations jurisdiction. Filing fees, return dates and electronic filing requirements vary, confirm with the relevant registry before filing.

In all States, the 21‑day deadline under the Corporations Act is absolute and is not affected by local court listing delays. If the registry is closed or experiencing delays near the deadline, take immediate steps to file electronically where available.

If You Ignore the Demand, the Winding‑Up Path and Practical Consequences

Failing to respond to a statutory demand within 21 days is one of the most consequential mistakes a company director can make. Once the compliance period expires without payment, negotiation or a filed set‑aside application, the company is presumed to be insolvent under s 459C(2) of the Corporations Act. The creditor can then file a winding‑up application with the court.

If a winding‑up order is made, a liquidator is appointed to take control of the company’s assets. Directors lose their management powers. The liquidator will investigate the company’s affairs, pursue voidable transactions and potential insolvent trading claims, and distribute any remaining assets to creditors. Banks will typically freeze accounts, customers and suppliers will be notified, and the company’s contracts may be terminated. Directors who allowed the company to trade while insolvent face potential personal liability, including civil penalties and compensation orders.

Quick Templates and Scripts

Template: Payment Plan Offer to Creditor

“Dear [Creditor],
We refer to the statutory demand dated [date] served on [Company Name] (ACN [number]). Without prejudice to any rights, we propose the following payment arrangement to resolve the claimed debt of $[amount]: [e.g., $X upon execution of a payment deed, followed by monthly instalments of $Y over Z months]. We request withdrawal of the statutory demand upon execution of the deed. Please confirm your position by [date, well within 21 days].”

Template: Notice to Creditor of Intention to Apply to Set Aside

“Dear [Creditor],
We refer to the statutory demand dated [date]. [Company Name] disputes the debt claimed and intends to apply to [the Supreme Court of (State) / the Federal Court of Australia] to set aside the demand under s 459G of the Corporations Act 2001 (Cth). An originating process and supporting affidavit will be served on you shortly. All rights are reserved.”

Sample s 459G Application Headings

1. Application to set aside statutory demand (s 459G, Corporations Act 2001)
2. Affidavit of [Director/Officer name] sworn [date]
3. Exhibit schedule (Exhibits A–[X])
4. Copy of statutory demand as served
5. Written submissions (if required by court practice)

Conclusion

Knowing how to reply to a statutory demand is essential for every Australian company director. The 21‑day deadline is strict and non‑extendable. Whether your path is to pay, negotiate or apply to set aside under s 459G, action must begin on the day the demand is served. Engage an insolvency specialist immediately, the consequences of inaction are severe, and the window for building a defensible position is narrow. For assistance locating an experienced insolvency lawyer, consult the Global Law Experts Australia lawyer directory or browse the full international lawyer listings.

Sources

1. Corporations Act 2001 (Cth), s 459E, s 459G
2. Federal Court of Australia, Corporations Information Sheet 1: Winding Up Proceedings
3. LegalVision, How to Respond to a Statutory Demand
4. Macpherson Kelley, Issuing a Statutory Demand
5. TDL Law, Guide to a Statutory Demand in Australia
6. Matthews Folbigg, Received a Statutory Demand?
7. Worrells, What Is the Minimum Amount for a Statutory Demand?