Overpayments and debts

Contributed by Danny Shaw and Dianne Anagnos and current to 1 September 2005

Most payments made by Centrelink to people not entitled to them are debts under the Social Security Act, and can be recovered by Centrelink. Debts may arise in situations ranging from a person incorrectly receiving a payment through no fault of their own to a person incorrectly receiving a payment through deliberate fraud.

WHAT IS A SOCIAL SECURITY DEBT?

To be a recoverable debt under the Social Security Act, the overpayment must fit one of the categories set out in Part 5.2 of the Act.

From 1 October 1997

From 1 October 1997 most, if not all, payments to which a person was not entitled under the social security law are ‘debts’, and therefore recoverable.

Before 1 October 1997

For payments made before 1 October 1997 it should be investigated whether there is a legally recoverable debt, because before changes in 1997 there were categories of overpayment that were not legally recoverable debts under the Act.

METHODS OF RECOVERY

Under Part 5.3 of the Act Centrelink can recover social security debts by various means, including:

• making deductions from a person’s social security payments
• garnisheeing wages and bank accounts
• commencing legal proceedings.

Anti-fraud measures and clients’ rights

As part of its program to limit fraud, Centrelink conducts random reviews of clients’ eligibility and entitlements, and participates in data matching programs with other government departments.

Powers to obtain information

Centrelink has wide powers to obtain information from any person (including government agencies, banks and employers) on any matter relating to a person’s social security entitlement (ss.191-198, Social Security Administration Act). Centrelink investigates information that comes to it from any source, including anonymous information.

Investigating officers

Investigating officers, usually part of mobile review teams, may conduct field visits either:

• to investigate allegations of fraud, or
• as part of a standard review.

Limits on investigating officers’ rights Investigating officers have no right to enter a house without the householder’s consent, and the pensioner or beneficiary does not have to answer questions or sign statements in their presence. A person is only legally required to provide information after a formal written request, citing the correct legislative authority for the request.

TIME LIMITS

Under the Act, no form of recovery action can be commenced by Centrelink either:

• after six years from the day the debt arose; or
• where the debt arose due to a contravention of the Act, six years from the date Centrelink discovered the false statement, misrepresentation or non-compliance, or could reasonably have been expected to become aware of those circumstances.

The six year limitation period starts again from:

• the date the debtor makes a part payment or acknowledges the debt; or
• the date Centrelink takes any action in relation to the debt.

Effect of bankruptcy

If a person with a social security debt becomes bankrupt, Centrelink cannot recover the debt during the period of bankruptcy. Generally, a debt is extinguished after the bankruptcy period, unless it can be shown that the debt arose due to fraud. This means once the bankruptcy period has expired, if the debt arose through fraud, it can be recovered (s.153 Bankruptcy Act 1966 (Cth)).

More information about debts generally and Centrelink’s recovery procedures can be found in The Independent Social Security Handbook.

WRITE-OFF AND WAIVER

A recoverable debt can be waived or written off (Social Security Act Part 5.4).

Write-off

Where Centrelink agrees to write off a debt action to recover is suspended, either for an indefinite or a specified period.

WHEN CAN DEBTS BE WRITTEN OFF?

Debts can only be written off where:

• the debt cannot be recovered at law;
• the person has no capacity to repay the debt;
• the person cannot be found;
• the person does not receive a social security payment and the cost of recovery may exceed the amount of the debt (s.1236(1A)).

Waiver

When a debt or part of a debt is waived, Centrelink permanently gives up its right of recovery. The debt ceases to exist.

DEBTS THAT MUST BE WAIVED

Under s.1237A a debt must be waived where:

• the debt is attributable solely to administrative error; and
• the money was received by the person in good faith; and
• the debt was not raised within six weeks after the first payment that caused the debt, or six weeks after the end of the notification period which the person complied with.

Family assistance overpayments

There is an additional requirement in the equivalent provision in the Family Assistance (Administration) Act 1999 (s.97). For family assistance overpayments to be waived, a person must show that they are experiencing ‘severe financial hardship’ as well as establishing the matters listed above.

DEBTS THAT MAY BE WAIVED

A debt may only be waived in certain circumstances specified in the Act. One of the most useful categories is set out in s.1237AAD, which states that a debt may be waived where:

• the debt did not arise from a person knowingly making a false statement or representation; and
• there are special circumstances other than financial hardship alone; and
• waiver is more appropriate than write-off.

The equivalent provision in the Family Assistance (Administration) Act is s.101.