Overpayments

Based on the contribution of Faisal Bakhtiar, Rosalinda Casamento and Olympia Sarrinikolaou, Victoria Legal Aid, as amended by Genevieve Bolton, Executive Director/Principal Solicitor of Canberra Community Law and current to 30 April 2018

Chapter 5 SSA

Where a person is paid a pension, benefit or allowance to which they are not entitled, a debt may be owed to the Commonwealth.

A 10 per cent penalty may be added to debts resulting from refusing or failing to provide information about employment income, or the knowing or reckless provision of false or misleading information without a reasonable excuse.

If the person is still receiving a social security payment, Centrelink will reduce a person’s payments to start repaying the debt in most cases. If a person does not make a repayment arrangement by phoning Centrelink by the due date, it will apply a standard repayment rate of 15% of a person’s payment or a higher rate if they have some income. A person can seek a lower repayment rate if they cannot afford the standard rate. If Centrelink agrees to a lower rate of repayment, the arrangement generally lasts for 3 months.

A person not in receipt of a social security payment will need to contact Centrelink and negotiate a repayment arrangement before the due date for payment. Otherwise a person may be liable to pay daily interest on the amount owing. Generally, Centrelink will also refer the debt to a debt collection agency. Debt collection agencies must comply with the Australian Securities and Investments Commission/Australian Competition and Consumer Commission debt collection guidelines.

Centrelink may also recover some or all of a debt directly from a person’s bank account, tax refund or other source of funds. This is known as garnishee action. For social security debts generally it may only do this if a person has failed to enter into a reasonable repayment agreement or missed a payment under an arrangement. However for family assistance debts (eg family tax benefit) tax refunds may automatically be used to pay the debt.

Cenrelink may also make an order (“departure prohibition order”) prohibiting a person from leaving Australia until they repay a debt or agree to a satisfactory repayment arrangement. It is a criminal offence to knowingly depart Australia without permission, if there is a departure prohibition order in place, with a penalty up to 12 months’ imprisonment.

In some circumstances, Centrelink may write-off or waive recovery of the debt. Centrelink may only waive recovery of a debt in certain defined circumstances (s 1237–1237AB).

The two main situations where a debt may be waived are where:

• Some or all of the debt is solely attributable to an administrative error by Centrelink
• There are special circumstances other than financial hardship alone which make it appropriate to waive the debt.

If a debt, or part of it, is solely attributable to administrative error by Centrelink, it must be waived if a person received the payment in good faith and the debt was not raised within six weeks of the first payment that caused the debt. A person will receive the payment in good faith, if they did not realise or have reason to know that they were being overpaid at the time.

A debt may also be waived if there are special circumstances which mean it is appropriate to have the debt waived. This is usually something that makes a person’s case unusual, especially if it would be unfair or particularly harsh on the person to pay the debt back. If a person does have special circumstances the debt may be reduced or waived entirely. A special circumstances waiver cannot be considered if a person or another person has knowingly provided false information or failed to comply with a statutory requirement.

Centrelink may also write-off a debt but only in limited circumstances, such as when there is no proof of the debt or if a person is not receiving a social security payment and it would be too expensive for Centrelink to recover the debt. Write-off criteria are contained in section 1236. Write off stops recovery action for a defined or undefined period. Unlike a waiver, write off does not extinguished a debt.

Any person who is faced with a demand for recovery of debt should immediately seek legal advice and consider whether to lodge an appeal (see Social security appeals process).

Similar provisions relating to Family Assistance overpayments are in part 4 of the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth).

Employment Income Confirmation (EIC) process (Robodebt)

The EIC process now as ‘robodebt’ was introduced from July 2016. The EIC process currently is only used for employees who are PAYG taxpayers and relates to earnings in the financial years from 2010-2011 onwards. A person may get a letter asking them to go online and confirm or update their income information if there is a difference between the earnings they reported to Centrelink when receiving a social security payment and the Australian Taxation Office (ATO) records based on information provided by employers. If a person doesn’t respond to the letter, the system will use the ATO information to assess whether a debt is owed. The system assumes that a person earned the same amount each fortnight over the period recorded by the ATO. A debt worked out using the ATO data only is likely to be inaccurate especially for people with variable and/or fluctuating incomes.

A person should seek legal advice before responding to one of these letters.

Notification obligations

Section 66A of the SSA Act requires the recipient to inform Centrelink if an event or change of circumstances occurs that “might affect the payment of their social security payment or the person’s qualification for the concession card”. While this section will have most relevance to criminal prosecutions, it may also have implications for overpayments. The requirement has been made retrospective to 20 March 2000. The High Court of Australia has handed down decisions clarifying the scope of these legislative obligations.

Any person who is faced with a criminal charge for overpayments concerning a failure to inform Centrelink of their change in circumstances affected by the retrospective legislation should immediately seek legal advice.