How do I write a letter of demand for unpaid trade work?

Before you write it

Business.gov.au says a letter of demand comes after you have tried and failed to get an invoice paid. Earlier reminders should already have gone out with a correct invoice and a clear payment date. It also warns that a demand could inflame a dispute, even though it may still be necessary to recover a debt.

Check the legal name of the person or business that owes the debt against the contract and invoice. Business.gov.au recommends identifying who owns the business rather than assuming your day-to-day contact is the right recipient.

Sources[1]

Check it before it goes

Business.gov.au lists these checks. Have you already tried friendlier means, such as a call or reminder letters? Is every fact accurate, so that nothing could be called false or misleading? Does it include a late payment interest rate only if your contract specified one? Does it mention only action you are prepared to take? Is it polite and respectful? Is it signed and dated? Are the contract, invoice, reminder letters and relevant emails attached? Have you kept copies of the originals and the signed letter?

Sources[1]

Choosing the deadline

The business.gov.au page gives no standard number of days, and this guide does not set one. Choose a calendar date you can defend as reasonable for the size of the debt, how long it has been overdue and what the customer must do to pay. Whether your contract or your state's rules affect that date or the next step is a question for your contract and a lawyer.

Sources[1]

Blank letter of demand

This is an original layout, not the business.gov.au sample. Delete any line that does not apply, in particular the interest line unless your signed contract provides for it.

LETTER OF DEMAND

[Date]

Sent by [registered post, with signed proof of delivery requested] and [email]

To: [full legal name of the person or business that owes the money, with ABN or ACN if known]
[address]

From: [your full legal name or business name]
ABN: [your ABN]
[address, phone, email]

Re: Unpaid invoice [INV-0000] for [short description of work] at [job address]

I am writing about the amount you owe for work I carried out under [quote or contract reference] dated [DD/MM/YYYY].

1. The debt
Amount owing: $[amount]
Invoice [INV-0000] was issued on [DD/MM/YYYY] and was due on [DD/MM/YYYY].
Payments received: $[amount or nil]

2. What has happened so far
I sent reminders on [DD/MM/YYYY] and [DD/MM/YYYY]. [Summarise any calls or replies, including any reason you were given for not paying.]

3. What I require
Pay $[amount] in full by [DD/MM/YYYY] to [bank details or payment link].
[Include only if your signed contract provides for it: Under clause [x] of our contract, interest of [rate] applies from [date].]

4. If you disagree
If you dispute any part of this amount, tell me in writing by [DD/MM/YYYY] which items you dispute and why.

5. Next step
If payment is not received by that date, I intend to [only a step you are prepared to take, for example seek advice about legal action to recover the debt].

Attached: [contract or quote], invoice [INV-0000], reminder letters dated [DD/MM/YYYY], relevant emails and messages.

Signed: ____________________
[Name]
Date: [DD/MM/YYYY]

Sources[1]

Sending it and keeping proof

Business.gov.au recommends registered post with signed proof of delivery. Keep delivery evidence, the signed letter and copies of the supporting records. If you ask a lawyer to prepare the letter, agree the scope and fee first.

If the unpaid work is construction work, check whether your state's security of payment process also applies before choosing a next step. The related guides cover Queensland and New South Wales.

Sources[1]

Common questions

What happens if you don't pay a letter of demand?

Business.gov.au says a letter may include a warning that the sender will consider legal action if the debt is not paid by a particular date. It does not describe an automatic penalty. What happens next depends on what the sender chooses to do, which is why the page says to mention only action you are prepared to take. Get advice before starting court action.[1]

Can you provide a sample letter of demand in Australia?

Business.gov.au offers a downloadable sample letter of demand as a Word document. This guide includes an original blank letter above that follows the same checks: amount, reason, payment date, attached records and a signed copy kept.[1]