Notices Used for Recovering Debts

There are a number of notices that can be served to individuals or companies with overdue debts. It’s important to understand what each one is and how you should respond. Here we outline the notices and their associated penalties.

Debt Collection Letters

After reminder letters have been sent to you without payment being received, a debt collection letter may follow.

Also known as a letter of demand, these will set out the amount owed, what the product or service was and the due date for payment. Late payment interest may be added to the amount owed if the written contract includes a payment of interest clause.

The letter may be from an individual, company, their lawyer or debt collection agency.

Statement of Claim and Judgement

A statement of claim is the beginning of a court case where the plaintiff will outline how much you owe for which goods or services. The plaintiff may also include an amount for interest, filing and service fees and lawyer’s fees.

If you ignore a statement of claim and take no action, the plaintiff can get a default action against you without you being notified or attending court. If you don’t agree with the statement of claim, you need to file a cross-claim against the plaintiff within a set timeframe.

If you agree with the statement, you can pay the amount and advise the court by submitting a notice of payment or file an acknowledgement of liquidated claim telling the court you wish to pay by instalments.

Statutory Demand

The court can issue you with a statutory demand which gives you 21 days to pay a debt or your company will be deemed to be insolvent. Your options are to pay the amount or contest the claim but you need to take action. If you ignore a statutory demand, the court can appoint an Official Liquidator to wind-up the company and you will lose control.

Director Penalty Notice

If you are the director of a company which does not meet its obligations for PAYG withholding and superannuation guarantee charge obligations, you can be held personally liable. The ATO may attempt to recover unpaid or unreported liabilities through a Director Penalty Notice which gives you 21 days to pay.

Garnishee Notice

The ATO or large creditor may be able to obtain funds direct from your bank account, debtors or employer. The garnishee notice will advise you of the ATO's intention before it makes contact with the person or business holding your funds. If you receive a notice and want to avoid the embarrassment and loss of cashflow, you need to act quickly in contacting the ATO to see if you can make an alternative arrangement.

Recovering Debts

Are there any notices for your debt that you don't understand very well? We strongly recommend talking to a professional or agent who can provide you with further information on negotiating with third parties, which can benefit your business.