How to write a letter of demand in Australia

What is a letter of demand?

A letter of demand is a formal written notice from a creditor to a debtor requesting payment of an outstanding debt. It sets out exactly what is owed, the basis for the claim, and a deadline for payment. In Australia, sending a letter of demand is typically the first formal step in debt recovery — and often the most effective one.

Unlike a casual payment reminder, a letter of demand signals that you are prepared to take legal action if the debt is not paid. This shift in tone significantly increases the likelihood of payment.

Why send a letter of demand?

• It creates a clear paper trail and establishes the debt in writing
• Courts require evidence of a prior demand before most debt recovery actions
• It often triggers payment without any further action — particularly with legitimate businesses that have simply delayed payment
• It puts the debtor on notice that you know your rights and are prepared to enforce them
• Statutory interest may begin to accrue from the date of demand in some jurisdictions

What to include in a letter of demand

A well-drafted letter of demand should include the following elements:

1. Your details

Full legal name or business name, address, ABN, and contact details. This establishes your identity as the creditor and allows the debtor to verify you.

2. The debtor's details

Full legal name or business name and address. If you know their ABN, include it — it removes any ambiguity about who the demand is addressed to.

3. The amount owed

The exact amount claimed, broken down if relevant (principal, interest, fees). Including statutory interest signals that you know your rights.

4. The basis for the claim

A brief description of the debt — the invoice number, date, and nature of the goods or services provided. Attach a copy of the invoice or agreement as supporting evidence.

5. A clear payment deadline

Specify a reasonable date — typically 7–14 days from the date of the letter. Courts have found that a 7-day deadline is reasonable for most B2B debts.

6. Consequences of non-payment

State clearly that if the amount is not paid by the deadline, you will take further action. This may include court proceedings, referral to a debt collection agency, or reporting to a credit bureau.

7. Payment instructions

Your bank account details (BSB and account number) or another payment method. Make it easy for the debtor to pay.

Common mistakes to avoid

• Threatening illegal action. You cannot threaten to do anything you are not legally entitled to do (e.g., report to police for a civil debt, blacklist, defame).
• Emotional language. Keep the tone firm but professional. Anger undermines your credibility.
• Inaccurate amounts. If the amount is disputed, a court will scrutinise any inconsistencies. Be precise.
• Missing evidence. Always attach the relevant invoice or agreement. A demand without supporting documents is easily challenged.
• Wrong entity. Send to the correct legal entity. "Bob's Plumbing" and "Robert Smith Pty Ltd" are different legal persons.

How to send a letter of demand

For maximum legal effect, send by:

• Registered post — creates a presumption of delivery
• Email with read receipt — fast and creates a digital record
• Both — for significant debts, belt-and-suspenders

Keep a copy of the sent letter, the delivery confirmation, and any responses from the debtor.

What happens after you send it?

Most debtors will respond within 7–14 days. Possible outcomes:

• Full payment — the most common outcome for businesses with legitimate cash flow issues
• Partial payment or payment plan offer — you can accept or reject; get any agreement in writing
• Dispute — the debtor contests the claim; you may need to provide more evidence or negotiate
• No response — see what to do next →