If you’ve received a statutory demand from the Australian Taxation Office (ATO) or another creditor, time is not on your side. You have 21 days to respond pay, settle, or dispute the debt before your company is presumed insolvent and faces liquidation.
While it can feel confronting, a statutory demand doesn’t have to mean the end of your business. With the right information and fast financial support, you can take control, protect your company, and avoid winding up proceedings.
This guide explains what statutory demands are, what happens if you ignore one, and how short-term finance can help you act quickly to protect your business.
What Is a Statutory Demand?
A statutory demand is a formal legal notice issued by a creditor including the ATO demanding payment of an outstanding debt within 21 days. It’s governed by Section 459E of the Corporations Act 2001 (Cth).
The notice must:
- Be for a debt of $4,000 or more.
- Be in writing, in the prescribed form.
- Include an affidavit verifying the debt amount.
- Be served to your company’s registered office.
Once issued, your business has a strict 21-day window to take action. If you don’t respond, the law presumes your company is insolvent, and the creditor can apply to wind up the company through the courts.
Who Can Issue a Statutory Demand?
Statutory demands can be issued by any creditor owed money by your company, including:
- The Australian Taxation Office (ATO) for unpaid tax, PAYG, or GST.
- Suppliers or contractors owed outstanding invoices.
- Financiers or lenders for unpaid loan balances.
In many cases, statutory demands from the ATO are the final step before a winding up application, making it essential to act immediately.
Your Options When You Receive a Statutory Demand
If you’ve received a statutory demand, there are three main ways to respond within the 21-day timeframe:
1) Pay the Debt in Full
The most straightforward way to resolve the issue is to pay the outstanding amount before the deadline. Once paid, the demand is satisfied, and no further legal action can occur.
2) Negotiate or Settle with the Creditor
If you can’t pay in full, reach out to the creditor or ATO to discuss settlement options. Open communication can sometimes prevent the situation from escalating to court.
3) Apply to Set Aside the Demand
If you believe the debt is disputed, incorrect, or offset by a counterclaim, you can apply to the court to set aside the demand. However, this process must be initiated within 21 days extensions are rarely granted.
If you do nothing, the creditor can use the demand as evidence that your company is insolvent and file a winding up application.
Consequences of Ignoring a Statutory Demand
If a statutory demand is ignored or unpaid, the repercussions are serious:
- Your company is presumed insolvent under law.
- The creditor (including the ATO) can apply to wind up your business.
- A liquidator may be appointed to sell assets and close the company.
- Directors risk personal exposure through Director Penalty Notices (DPNs) for unpaid taxes.
- Business reputation and credit standing suffer long-term damage.
However, you can still act before the court hearing by paying the debt or arranging finance to satisfy the demand.
How Short-Term Finance Can Help
Short-term or bridging finance can provide fast funding to pay off the debt and stop legal proceedings before liquidation occurs.
How It Works:
- Assessment: Provide details of the statutory demand and debt amount.
- Security Review: The lender evaluates your property or business assets.
- Approval: Decisions are made within 24–48 hours.
- Settlement: Funds are released directly to pay the ATO or creditor.
Because this funding is asset-based, lenders focus on the value of your security and your exit strategy, not your credit score or financial history.
Benefits of Using Short-Term Finance:
- Immediate Payment: Stop winding up applications before they begin.
- Preserve Operations: Keep trading without interruption.
- Protect Directors: Prevent escalation to DPNs or personal liability.
- Buy Time: Refinance or restructure your business once the pressure is lifted.
When to Consider Short-Term Finance
Tax or creditor-related statutory demands often arise from temporary cash flow issues. Short-term finance is ideal when:
- You have strong assets but limited liquidity.
- Clients owe you large receivables that haven’t cleared.
- You’re waiting on a property sale or refinance.
- You need immediate capital to avoid court action.
It’s a bridge, not a long-term fix designed to protect your business while you stabilise your finances.
Case Study: Avoiding Liquidation Through Fast Action
A Melbourne-based construction business received a statutory demand for $130,000 from the ATO. Cash flow was tight due to delayed project payments. With only two weeks left, the director arranged short-term tax debt finance secured against property equity.
The funds were released within 48 hours, the ATO was paid, and the winding up threat was withdrawn. The business continued trading and later refinanced into a longer-term facility.
Practical Steps to Take Immediately
- Read the Notice Carefully: Confirm the issue date and the exact deadline.
- Seek Professional Advice: Contact your accountant or insolvency expert.
- Communicate with the Creditor: Let them know you’re taking action.
- Arrange Finance or Settlement: Secure funding to pay or negotiate before the 21-day window closes.
- Plan Ahead: Once resolved, focus on cash flow forecasting and tax compliance to prevent recurrence.
Working with the Right Finance Partner
When time is short, you need a lender who understands urgency and ATO processes. Look for providers who:
- Specialise in ATO and statutory demand finance.
- Offer fast approvals (within 24–72 hours).
- Communicate clearly and transparently.
- Collaborate with your accountant or lawyer to meet legal deadlines.
At Bridging Loans, we specialise in urgent business finance designed for situations exactly like this. We move quickly, act decisively, and help you regain control.
Final Thoughts
A statutory demand is a warning sign but not the end of the road. With the right advice and funding, you can pay, dispute, or settle before liquidation becomes unavoidable.
If your business has received a statutory demand from the ATO or another creditor, act immediately. Short-term finance can provide the breathing space you need to resolve the issue and protect your business.
At Bridging Loans, we’re here to help you act fast, stay compliant, and move forward confidently.