How to Write a Letter of Demand in Australia (Updated for 2022)

Last updated: 1 July 2024

How to Write a Letter of Demand for Money Owed and Get Paid. A Letter of Demand is a formal document used to demand payment from an individual or business that owes you money. This guide will walk you through the process of writing an effective letter of demand to help you recover your debts.

Using a Letter of Demand is an important formal first step when you decide to use the legal system to force payment. You must send a formal Demand before you can lodge a claim for your debt with the court. You can do this whole process yourself without the aid of a lawyer and save substantial fees but you must follow a set legal process not to lose your claim rights.

An Australian Demand letter can be used both for personal and business debts. You can stop the process anytime and agree on a payment plan with the debtor and/or agree to a reduced amount.

TLDR: Quick Summary of this Legal Guide

  • A Letter of Demand is a formal request to be paid an outstanding debt. It can be used when an individual or a company owes you money and they have not responded to your invoices or other payment requests.
  • Letters of Demand are useful and effective because they allow debtors (those who owe you money) to pay their debts while maintaining goodwill. They also give notice that you will commence legal proceedings if you are not paid.
  • An effective Letter of Demand should include the amount of outstanding debt, the date the debt was due, the date of the Letter of Demand, a description of the debt, and any relevant evidence of an agreement that you have with the person/company you are claiming the money from.
  • You should aim to send two or three Letters of Demand before beginning any court action and provide 7-21 business days to pay the debt, which shows the court that you have been reasonable in your attempt to resolve your dispute.
  • Do not ignore a Letter of Demand if you receive one because this will not be looked on favourably by the court. Instead, check the letter to ensure that you understand and agree with the amount owed, and either organise a payment plan with the sender if you accept the terms of the letter or seek clarification if you disagree with any of the details in the letter.

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If after reading this guide you still have a question, get in touch as we’d love to keep adding your questions to this comprehensive guide.

Recovering a Debt

What is a Letter of Demand?

A formal request to be paid an outstanding debt.

You can use a Letter of Demand template when you are owed money by either an individual or a company and they have not responded to your invoices or other payment requests.

The types of debts that are commonly claimed include debts owed for payment of outstanding rent, services, monies owed, money lent and goods not supplied, although this isn’t a complete list. You can use it for business debts or if you were a contractor and were not paid for your services and feel it is time to take this more formal approach.


What do debtor and creditor mean?

The term ‘debtor’ refers to the person or organisation that owes money. The term ‘creditor’ refers to the person or organisation that is owed money.

It should not be used for loss or damage but only for debts for goods or services rendered. For example, you cannot use a Letter of Demand if somebody damages your property and you want them to pay for it.

What are the advantages of a Letter of Demand?

There are several advantages:

  • Gives a clear notice of intention to commence legal proceedings if you are not paid
  • It gives the debtor another opportunity to pay you
  • Maintains goodwill before going forward with potentially expensive litigation
  • It may be used as evidence in court that you gave the debtor ample opportunity to pay
  • Written proof that you have tried to settle the matter amicably, etc.

Letters of Demand are very useful. They often encourage debtors to pay their debts but avoid the costs of using lawyers and chasing money owed through the courts. Every small/medium-sized business should be familiar with the legal process of writing and serving a Letter of Demand.

Are they effective?

Yes, Letters of Demand can be quite effective in several situations for you to recover money owed to you.

It may be that the debtor genuinely intends to pay you and has a good reason for not doing so. They might have misplaced the invoice, and upon receiving your demand for the debt owed, they may be prompted to either pay you or contact you to negotiate. In these circumstances, starting with a Letter of Demand (rather than going straight to court without warning) can help preserve the goodwill between you and your customers while ensuring you get paid as soon as possible.

A second scenario is that a letter sent to a debtor that threatens court action will ‘scare’ them into paying you the debt to avoid the stress and expense of court.

Are there any limits on dollar amount or time?

While there are no strict limits on what can be claimed in a Letter of Demand, there are some limits on what can be claimed in various courts in Australia. These amounts differ between the States and Territories (see the table below for specific amounts in each State or Territory).

For example, each State and Territory has some small claims court. These are generally designed to provide a straightforward, cost-effective way to claim smaller debts. However, these small claims courts each have a maximum claim amount. If the amount of your claim exceeds their limit, you may be required to go to a higher court (such as the State Supreme Court), which will cost more and be a more complicated process.

For ordinary claims concerning a breach of contract, there is also a six-year time limit (three years in the Northern Territory) to collect the debt, starting from when it became due. However, if the debtor at some point acknowledges the debt and gives a written promise to repay it, the time limit resets and starts again from the date of the written promise.

See the table below for specific amounts and timing in each State and Territory. The data is current as of December 2020:

State/TerritoryMax AmountTime LimitCourt
ACT$25,0006 yearsACAT
$250,0006 yearsMagistrates Court
NSW$20,0006 yearsSmall Claims Division, Local Court
$100,0006 yearsGeneral Division, Local Court
NT$25,0003 yearsNTCAT
$100,0003 yearsLocal Court
QLD$25,0006 yearsQCAT
$150,0006 yearsMagistrates Court
SA$12,0006 yearsMinor Claims, Magistrates Court
$100,0006 yearsGeneral Claims, Magistrates Court
TAS$5,0006 yearsMinor Civil Claims, Magistrates Court
$50,0006 yearsCivil Claims, Magistrates Court
VIC$100,0006 yearsVCAT or Magistrates Court
WA$75,0006 yearsMagistrates Court
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Warning on Time Limits

The time limits listed here represent the general rules for general contract disputes in these jurisdictions and are provided as a rough guide for your information. However, there are a lot of exceptions, so in many cases, different time limits may apply. If you have any concerns about the time limits for your claim, seek legal advice.

For claims that exceed these limits, in most cases, the matter would have to go to a higher court, such as the Supreme Court of the relevant State or Territory. This is more expensive and more complicated, and a lawyer is necessary to assist you with the process.

Writing a Letter of Demand

How should I word the Letter of Demand?

It must include the following:

  • Amount of the debt
  • Date the debt was due
  • Date of the Letter of Demand
  • Description of the debt (such as what the money is owed for), and
  • Any relevant evidence such as contracts, invoices, emails agreeing to work or other written agreements that you have with the person/company you are claiming the money from.

Any proof of debt, such as invoices, emails, letters or other documents relating to the debt, should be copied and attached to the Letter of Demand.

Need Help with a Letter of Demand?

As a full-service law firm, Legal123 offers more than just reasonably priced legal templates. Our experienced Australian lawyers can draft a custom Letter of Demand tailored to your specific situation. We also offer comprehensive legal advice to guide you through the process and protect your interests.

And you must be aware of any:

  • Claim amount limitations (i.e. minimum and maximum dollar amounts), and
  • Time restriction limitations for claiming your debt.

It is very important to date your Letter of Demand so the debtor knows exactly the deadline to contact you and pay. Writing a Demand letter should be straightforward and clear. Do not make any allegations or arguments in the letter. Simply state the debt, when it was incurred, what it was for, confirm it still has not been paid and the number of letters you have previously sent.

How long should I wait for the final payment?

You should ensure the letter warns that you will take court action if the debtor does not pay as requested. Generally, it is best to give your debtor one to three weeks to make the final payment, depending on how many Letters of Demand you decide to send.

How many Letters should I send?

Generally, you should send two or three letters before beginning court action and provide 7-21 business days to pay the debt, which shows the court you have tried to be reasonable. If the debt is substantially overdue, two Letters of Demand should be sufficient notice to repay, but you may wish to consider providing a longer period of time to pay. If you only intend to send one letter, or if it is your final Letter of Demand, you should consider providing 21 days for the debtor to pay.

Irrespective of the number of letters you send, you should give the debtor a total of at least three weeks to pay before starting court action. This gives the debtor a fair opportunity to respond and also gives ample time in the event they are away or are in hospital and have not received the letter.

Sending a Letter of Demand

How do I send a Letter of Demand?

First, check your contract or agreement with the debtor to ensure you have the right to make a claim, are following the correct process and are sending the demand to the correct address.

Most contracts explain the payment schedule that must be followed. Many contracts also include a dispute resolution clause, which requires the parties to do certain things before going to court (such as mediation or arbitration). Ensuring you comply with any dispute resolution clause before sending your Letter of Demand is important.

Most contracts also include an “address for service of notices” for the parties. This is the address where the demand should be sent. If you send it to another address, then this can allow the debtor to argue that they never received the letter and to delay payment further. If you happen to know another address for the debtor, then there is no harm in sending a copy of the Letter of Demand to several addresses at the same time, as long as you make sure that one copy goes to the address that is listed in the contract.

Second, attach any relevant contracts, agreements, invoices and evidence that you supplied the goods or services as promised. These are evidence of your claim in the Letter of Demand.

Third, do not imply that court proceedings have commenced and do not make your Letter of Demand look like a formal court document.

Last, send the Demand letter by registered post or by courier to ensure you have proof that it was delivered. Then, allow a reasonable time for the person who owes you money to comply with or respond to the letter.

There are several options:

  • Post: Sending a Letter of Demand by registered post will prove it was received.
  • Email: You can do this if you keep a copy. The best method to prove receipt is to include a ‘read receipt’ in the email. Although email is increasingly the norm in commerce, there is always the risk that an email can be claimed to have been confused with junk emails or spam and never read.
  • Fax: If you send by fax, ensure you keep the ‘facsimile sent’ confirmation.
  • Independent Service Firm: Such a firm can serve the letter in person on the debtor. This is expensive, but it may be worthwhile if you are owed a large amount or are not certain of the debtor’s location (the service you choose for delivery may assist you with this). Usually, this will cost you around $100 for each attempted delivery. The firm will sign an affidavit confirming the delivery or attempted delivery.

Should I have the Letter served to a home or business address?

As mentioned above, if there is an “address for service of notices” listed in the contract, then a copy of the Letter of Demand should be sent to this address.

When the debtor is a business, the letter should also be served to that business address, but it does not need to be given to a specific person. When serving the Letter of Demand on a person the letter should ideally be handed to them, so either a business or home address can be used.

What if the person being served won’t accept the Letter?

Suppose delivery is not possible because they are either refusing to accept delivery or claiming they are not available. In that case, the server must leave the letter where the person can see it and explain to them that it is an important legal document relating to the debt. Then the server must sign an affidavit confirming they have served the Letter of Demand.

What evidence do I have that the Letter was received?

Evidence of receipt of the Letter of Demand is a requirement of the court. This is needed to demonstrate two key elements:

  1. You have communicated that the debt is due and have attempted to settle this debt, and
  2. The debtor has knowledge of the debt being due.

If you go to court and the debtor states that they have not received a Letter of Demand, you will need evidence to demonstrate that you have made every attempt to send the Demand to them. If you do not have the evidence the court will likely adjourn the matter and ask you to attempt to settle it out of court first (and could consider that you have wasted the court’s time).

You need to ensure you have evidence of any and all Letters of Demand you send to the debtor. For example, when you send your Demand letter by registered mail, the debtor signs for the registered letter, and you have evidence; sending the letter by regular mail will be inadequate.

Unpaid Letter of Demand

What if my Letter of Demand is not paid?

You should wait a minimum of 21 days, and then further action can be commenced. This 21-day period is suggested to give an adequate amount of time for the debtor to organise payment, negotiate with the creditor or find an alternative arrangement.

Once that period has elapsed, if the debtor still has not paid the debt or communicated with you to arrange payment, you may consider filing a claim in the relevant court in your jurisdiction. Statement of Claim forms, instructions and information links for all States and Territories can be found in our Legal123 Letter of Demand package.

You should check the State court websites to ensure you understand any and all recoverable amounts before taking any action. Each State caps the recoverable cost of serving a Statement of Claim and the service fees vary from State to State depending on several variables, including service distances.

For example, if the debtor is out of State or is out of the country, serving them with the Statement of Claim can be costly. In addition, there is a time limit for service which must be met as a Statement of Claim must be served within 6 months of filing your claim.

The Statement of Claim form must then be lodged with the court. This is traditionally done in person at the court. However, some States and Territories are now accepting online lodgements. Check with the relevant court for up-to-date information about the filing process.

If filing in person, you must print and bring four copies of the Statement of Claim to the court for filing. One copy will be given back to you by the registrar once it has been checked, another will be sent to the debtor and the other two copies will be kept by the registry at the court.

How much does a Statement of Claim cost to file?

Filing fees for a Statement of Claim vary from State to State. The filing fees also usually depend on the claim amount, whether an individual or corporate entity is making the claim and sometimes whether the claim is being lodged online or not.

The table below gives an indication of the ranges of filing fees. The data is current as of December 2020:

State/TerritoryFiling Fee Range
ACT$77 – $2,153
NSW$105 – $514
NT$105 – $526
QLD$27 – $684
SA$23 – $1,202
TAS$122 – $235
VIC$65 – $720
WA$156 – $1,227

For up-to-date fees for your type of claim, please check the website of your local court.

How is the Statement of Claim served on the debtor?

There are several ways this can happen:

  • You can serve the Statement of Claim yourself in person
  • You can pay the court to send it by post (only the court may send it by post), or
  • You can hire a process server.

If you hire a process server, the cost is around $100 each time the server attempts to deliver the documents. It will cost even more for a process server if the debtor is inter-state or overseas.

Hiring a process server for a Letter of Demand is unnecessary when you can send the documents by registered post. However, if the debtor refuses to accept the registered post or if you no longer know the location of the debtor, then you may have to consider hiring a process server to assist.

Normally the Statement of Claim must be served within six months of the claim being lodged in court.

Can I recover any of my costs?

You should check the State or Territory court websites to understand the rules that apply in your case. How much you can get back varies from court to court, and even if you can claim back costs, there’s usually a maximum limit. Normally there are costs you cannot recover, including the costs of using a process server to serve the Statement.

What happens after the debtor is served with the Statement of Claim?

Once the debtor is served with the Statement of Claim, they will have 21 or 28 days to respond, depending on your location.

If the debtor doesn’t respond within this time, you can then apply to the court to have a default judgment in your favour, which means there is no need for a hearing. However, you must apply within nine months of originally filing your claim with the court, or else the case will be dismissed.

If the debtor does file a defence or counter-claim, meaning they are planning to defend the claim and argue against the debt, you will have to attend court.

Need Help with a Letter of Demand?

As a full-service law firm, Legal123 offers more than just reasonably priced legal templates. Our experienced Australian lawyers can draft a custom Letter of Demand tailored to your specific situation. We also offer comprehensive legal advice to guide you through the process and protect your interests.

The debtor may also contact you directly to try to settle the case without a court hearing. If the defendant only admits to owing part of the claim, then you can still proceed with the court hearing or decide to accept a lesser amount. In many cases accepting a lesser amount may be your best option rather than continuing with the court process and physically having to attend court, particularly if you believe the debtor will not be able to pay the full amount due to financial issues.

How do I file for a default judgment?

If there is a default judgment in your favour, meaning the court has not heard from the debtor, you do not have to go to court and the court will award you the right to claim your debt. This right can only be set aside if the defendant can show that they did not receive the Statement of Claim.

The NSW step-by-step guide walking you through the whole process can be found here.

What if the debtor files a defence?

If a debtor files a defence or a counter-claim against you, then you will need to attend court. You will also have to go in front of a magistrate and present your case. You must bring all evidence of the debt, including copies of Letters of Demand and receipts from sending those letters. You will be given advance notice of the defence the debtor plans to make and must be prepared for this. You must also dedicate at least one whole working day to attending court.

If the debtor does not attend the court hearing, you can file for a default judgment against them and the court will award you the right to claim your debt and costs immediately.

What if we come to a settlement?

If there is a settlement at any time between yourself and the debtor after you have served the debtor with a Statement of Claim, you should obtain a consent judgment. This means the court is aware of and can enforce your agreement.

This may be done by having the settlement terms become an official ‘judgment’, which means the court can register and enforce this agreement.

A consent judgment can be made in two ways:

  1. Filing a form called a Consent Judgment at the court registry, or
  2. Giving a copy of the settlement agreement signed by both parties (often called Terms of Settlement) to the registrar, assessor or magistrate at the Pre-Trial Review or the hearing.

Having a consent judgment is important because it finalizes your case. It means you both have agreed on a settlement of the debt. Additionally, if for some reason after settling the debtor decides not to pay, you can then bring enforcement proceedings against them.

A step-by-step guide to getting a consent judgment in NSW can be found here.

How do I get paid?

If you win the case, whether by default or at a hearing, the court will issue a judgment stating that the debtor must pay you. Normally the debtor will pay you on their own after such a ruling.

If you are not paid, you must begin enforcement proceedings against them. You will have 6-12 years from the judgment (depending on what State or Territory you are in) to begin enforcement proceedings. After the proceedings, a judgment will be entered into the debtor’s credit record that lasts 5 years. Usually, this is enough incentive for the debtor to pay.

If the debtor still does not pay, the court has several options to ensure you are paid. These include garnishing the debtor’s wages and ordering the debtor’s assets to be sold. In some cases, it can go as far as imprisoning the debtor! However, all of this still does not necessarily mean you will get your money because if the debtor is bankrupt or unable to be located, you may not be repaid.

Receiving a Letter of Demand

What should I do if I receive a Letter of Demand?

Most important – do not ignore a Letter of Demand.

Immediately check the Letter of Demand to ensure you understand and agree with the amount owed. If you disagree with the amount owed or do not understand how the amount has been determined, write to the person or organisation who sent the Demand asking for clarification or for any missing information.

If you believe it was sent by mistake or it is frivolous, you should contact the sender and try to sort it out. If you do not believe you should pay the claim, immediately seek legal advice to dispute it.

A court will not look favourably at you if it believes you have not tried to mitigate or sort out your dispute. The court will see it as you being disrespectful of court time and contemptuous.

How do I pay a Letter of Demand?

If you agree with the claim, contact the creditor and work with them to negotiate a payment schedule.

Ensure you clarify to the creditor that your discussions are on a “Without Prejudice” basis. This means that you can discuss the payment schedule without losing your legal right to change your position in the future should you not reach an agreement and end up going to court.

If you cannot afford to pay the full amount immediately, offer to pay in instalments and agree on a payment schedule with your creditor. Remember, most creditors are willing to accept less than the full amount to avoid the time and expense of chasing the money via the courts.

If you are not able to pay at all, then write a letter to the creditor letting them know this.

Make sure to keep records of any payments you make or insist on getting payment receipts from the creditor. You do not want the creditor to accept your cash payment and then turn around and tell a court that you never paid them.

In some cases, it may also be worthwhile to consider having the creditor sign a Deed of Release to confirm that once you pay the agreed amount to the creditor, they will give up any claims against you. This is an important document so it may be necessary to have a lawyer assist you with this.

How do I answer a Letter of Demand?

You should write a reply to the person who has sent you the letter. Depending on your situation there are four options:

  1. Ask for clarification of the details of the debt if they are missing or unclear
  2. Deny the claim, if you do not owe the debt or have already paid it
  3. Accept responsibility for the debt and work out a payment plan, or
  4. Attempt to negotiate with the creditor. Usually, this is for a lesser amount if you think you may only be partially responsible for the amount owing or you believe you won’t ever be able to pay the total amount, for example, if you are facing bankruptcy or a similar situation.

You should reply quickly and keep a copy of this reply.

Can I negotiate payment options?

You can negotiate any payment option so long as the creditor agrees. You can suggest a monthly payment plan or another arrangement such as half the debt to be paid now, half to be paid later.

Depending on your financial situation, a creditor may be willing to accept a lesser amount if you are on the verge of bankruptcy and unable to pay. It is likely that a creditor in this situation will be willing to receive a lesser amount rather than risk ending up with nothing. Additionally, you can apply to the court to pay in instalments.

We hope you found this article on How to Write a Letter of Demand useful.

vanessa emilio of legal123

About the Author: Vanessa Emilio

Vanessa Emilio (BA Hons, LLB, ACIS, AGIA) is the Founder and CEO of and Practice Director of Legal123 Pty Ltd. Vanessa is a qualified Australian lawyer with 20+ years experience in corporate, banking and trust law. Click for full bio of or follow on LinkedIn.

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