What is a Statutory Demand?
A Statutory Demand is a legal letter sent to demand payment of a debt owed by a company. It is a formal legal notice issued under Section 459E of the Corporation Act 2001 (Cth). The company must comply within 21 days, otherwise it will raise a legal presumption that the company is insolvent, which allows the creditor to apply to court to wind up the company. Statutory demands usually signal that the creditor is serious about reclaiming debts owed, and concerned about your company’s solvency.
ATO (Australian Taxation Office)
The ATO is the most common issuer of statutory demands. Multiple response options are available — from informal negotiation through to formal insolvency processes.
Non-ATO Creditors
A statutory demand can be issued by a range of creditors, including: suppliers or trade creditors, contractors or service providers, lenders or finance companies, landlords (for unpaid commercial rent), former business partners or shareholders and debt collection agencies acting on behalf of creditors.
What are your options for ATO Statutory Demands?
If you’ve received an ATO statutory demand, it’s critical to act quickly and understand your available options. A statutory demand is a formal notice requiring your company to pay a debt within a strict timeframe—typically 21 days—or risk serious consequences, including potential winding-up proceedings. Depending on your situation, you may be able to pay the debt, negotiate with the ATO, or apply to set aside the demand if there are valid grounds. Knowing the right course of action early can help protect your business and avoid escalation.
| Unofficial Actions | ||
|---|---|---|
| Payment in full | Negotiate a payment plan | Dispute the debt |
| Pay the full outstanding amount before the 21-day deadline. The demand is withdrawn once payment is confirmed. | Contact the ATO or creditor to arrange a repayment instalment plan before the deadline expires. Be sure to request the creditor sets the demand aside, or it can still take effect. | If you believe the debt is incorrect or genuinely disputed, you may apply to court to have the demand set aside within 21 days. |
| Official Actions | ||
|---|---|---|
| Creditors' Voluntary Liquidation | Small Business Restructuring | Voluntary Administration |
| The company's directors resolve to wind up the company voluntarily, appointing a liquidator to manage the process and distribute assets to creditors. | A streamlined process for eligible small businesses to restructure debts while directors retain control of day-to-day operations. | A process used to save or sell a company with a viable business, that has suffered a one-off downturn. An option for companies not eligible for Small Business Restructuring. |
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OUR
Team
Cliff Sanderson
PARTNER – DISSOLVE
Cliff is a corporate restructuring specialist with over 30 years of experience in Australia and internationally. He is the founder of Dissolve.
Brad Vincent
SENIOR CLIENT ADVISOR
After 15 years of being an advisor, Brad has developed an excellent understanding of the legal and practical issues facing a director of an insolvent company – it is rare for a director to throw a new situation at Brad.
Geoff Granger
PARTNER – DISSOLVE
Geoffrey has over 35 years’ experience in restructuring, turnaround and insolvency. As a registered liquidator, he has extensive experience in all areas of investigations and recoveries.
Frequently Asked Questions
What happens if I ignore a statutory demand?
If you ignore a statutory demand and do not respond within 21 days, the creditor can apply to the court to wind up your company. The court will presume your company is insolvent, and unless you can prove otherwise, a winding-up order may be granted.
Can I dispute a statutory demand from the ATO?
Yes — but you must act fast. You can apply to the court to have the demand set aside within 21 days of receiving it. Grounds for disputing include a genuine dispute over the debt, an offsetting claim, or a defect in the demand itself. You cannot dispute it after the 21 days have passed.
How long do I have to respond to a statutory demand?
You have 21 days from the date the demand was served to either pay the debt, negotiate with the creditor, or apply to court to set it aside. This deadline cannot be extended, so it is critical to seek advice immediately.
Does receiving a statutory demand mean my company is insolvent?
Not necessarily. Receiving a statutory demand does not mean your company is insolvent — it simply means a creditor is claiming you owe them money. However, if you fail to respond within 21 days, the law presumes your company is insolvent, which can lead to a winding-up application.
What is the minimum debt amount for a statutory demand?
A creditor can only issue a statutory demand if the debt owed is $4,000 or more (as of July 2021, increased from the previous threshold of $2,000). If the amount claimed is below this threshold, the demand is not valid.
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Stories from our customers
Brad has helped us get through an extremely stressful time. Their advice and guidance was incredibly helpful.
Spoke to Dissolve to understand obligations when closing up company and possible approaches and outcomes with regulators. Brad was clear, pragmatic and helpful with his advice describing the tradeoffs for different approaches. Highly recommend working with Dissolve for any restructuring or liquidation needs.
Cliff and John from Dissolve are Chartered Accountants and provide great Corporate Recovery and Insolvency advice. They both worked with one of the big 4 accounting firms. I worked with them on a project in 2019 and their advice was practical and helpful.
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