Letter of demand: the template and the rules (Australia)

Updated 5 August 2026 · By the Badger team

A letter of demand is the formal final warning before legal action: a dated, documented statement that the debt is real, the amount is exact, and a deadline now applies. It's the step that turns "they'll pay eventually" into a decision — theirs or yours. Here's when to send one, a copy-paste template, and what actually happens next.

General information only, not legal advice. For significant debts, disputed work, or anything involving a customer in financial distress, talk to a solicitor or your industry association first.

When a letter of demand is the right move

Send one when the ordinary escalation ladder is exhausted: your friendly nudge, firm follow-up and final notice have all gone unanswered or produced only broken promises. That's typically 45–60+ days overdue. Don't lead with it — a letter of demand aimed at a customer who simply lost the invoice burns a relationship a two-line email would have kept. And check one thing before anything else: that the invoice genuinely remains unpaid. Demanding a settled debt is the fastest possible way to look both aggressive and disorganised.

What it must include

• Exactly who owes what: the legal/trading name of the debtor business, invoice numbers, dates, and the precise amount outstanding.
• What the debt is for — one plain sentence about the goods or services supplied.
• A firm deadline — 7 or 14 days is conventional.
• What happens if the deadline passes: that you intend to pursue recovery, which may include a claim in the relevant court or tribunal, without further notice.
• How to pay — make compliance one step, not a scavenger hunt.

Keep the tone factual and cold, not angry. A letter of demand persuades by being unmistakably procedural: this is no longer a conversation, it's a record being built.

The template

{{Your business name}}
{{Address}} · {{ABN}}
{{Date}}

{{Customer business name}}
{{Customer address}}

LETTER OF DEMAND — Outstanding amount: {{amount}}

Dear {{name}},

We refer to the following invoice(s), issued for {{goods/services supplied}}
and now overdue despite previous reminders:

  Invoice #{{number}}, issued {{date}}, due {{due date}} — {{amount}}

Total outstanding: {{amount}}.

We require payment of the full amount within 14 days of the date of
this letter, that is by {{deadline date}}. Payment details:

  {{BSB / account / reference, or payment link}}

If payment is not received by that date, we intend to commence
proceedings to recover the debt, together with any interest and costs
we are entitled to claim, without further notice to you.

If you dispute this amount, or wish to discuss payment arrangements,
contact us in writing within 7 days at {{email}}.

Yours faithfully,
{{Name, position}}
{{Business name}}

Send it by email and post if you can, and keep copies of everything — the letter's second job is being Exhibit A.

The rules while you chase

Debt collection in Australia is governed by the ACCC and ASIC's joint debt-collection guideline, and it binds businesses collecting their own debts, not just agencies. The short version: contact at reasonable hours and reasonable frequency, no misleading threats (never claim legal action you don't intend to take), no harassment, and stop contacting a debtor's workplace or family. A letter of demand that follows the template above sits comfortably inside the rules — the trouble starts with daily phone calls and invented consequences.

If the letter is ignored

• Small claims. Every state and territory has a small-claims court or tribunal (NCAT in NSW, VCAT in Victoria, QCAT in Queensland, and equivalents elsewhere) that handles typical invoice amounts with modest filing fees and no lawyer required. Your letter of demand is the expected first exhibit.
• A collection agency — for debts large enough to be worth the commission, once your own process is exhausted.
• Writing it off — sometimes the honest answer. A letter of demand forces the decision either way, and a written-off debt should also change the terms you offer that customer next time (see payment terms).

The better outcome is never needing one

Almost every debt that reaches the letter-of-demand stage was chased too slowly in its first month. Consistent, courteous reminders that start within days of the due date collect the overwhelming majority of invoices long before legalese enters the picture — that steady follow-up is exactly the discipline accounts receivable software exists to run.