Overview of overpayments
Where a person is paid a pension, benefit or allowance to which they are not entitled, a debt may be owed to the Commonwealth.
Overpayments are covered in Chapter 5 of the Social Security Act 1991 (Cth) (‘SS Act’).
Similar provisions relating to family assistance overpayments are in Part 4 of A New Tax System (Family Assistance) (Administration) Act 1999 (Cth).
A 10 per cent penalty may be added to a debt if the person with the debt refuses or fails to provide information about their employment income, or they knowingly or recklessly provide false or misleading information without a reasonable excuse.
Recovering the debt
If the person with the debt is still receiving a social security payment, the debt can be recovered by withholding part of that payment.
If the amount being withheld is causing the person hardship, Centrelink can reduce the withholding amount either temporarily or indefinitely.
When asking Centrelink to reduce the amount being withheld, details of financial circumstances need to be provided.
The Commonwealth Government can also recover an overpayment by civil court proceedings.
Other means of recovery include:
- a garnishee order (an order that allows money to be deducted from wages, bank accounts, tax returns and lump sum Centrelink payments);
- repayment by instalments;
- recovery from a third party.
Where a person is receiving income other than a government benefit, Centrelink will often refer a debt to private debt collectors. Private debt collectors must comply with the Australian Securities and Investments Commission/Australian Competition and Consumer Commission debt collection guidelines.
Any person who is faced with a demand for recovery of a debt should immediately seek legal advice (see Chapter 2.4: Legal services that can help) and consider whether to lodge an appeal (see ‘Social security appeals’).
Write-off or waive the debt
In some circumstances, Centrelink may write-off or waive the recovery of a debt.
Write-off a debt
The decision to write-off a debt is made when it is determined that, in the circumstances, there is no point trying to recover the debt. However, unlike when a debt is waived, a write-off debt still exists and may be pursued later.
Centrelink may write-off a debt in limited circumstances. These include where 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 (s 1236 SS Act).
Waive a debt
Where a debt is waived, the power to recover the debt is permanently extinguished.
Centrelink may waive the recovery of all or part of a debt in certain defined circumstances (s 1237–1237AB SS Act). These include where the person with the debt has special circumstances, and the debt was not caused by a person knowingly failing to comply with an obligation or knowingly giving false information.
Centrelink must generally waive the recovery of a debt if:
- the debt has been caused 100 per cent by an error made by Centrelink, and the person received the payment in good faith (unless the debt was raised within prescribed time limits);
- the value of the debt is less than $200 and it is not cost-effective to recover the debt (this does not apply if the debt is at least $50 and could be recovered by deductions from the debtor’s social security payments);
- the person is prosecuted and sent to jail for the debt, and the judge or magistrate actually says that they are going to jail for longer because they can’t or won’t pay the debt.
A range of notification obligations can arise under ‘notification obligation letters’ that are issued under the Social Security (Administration) Act 1999 (Cth) (‘SSA Act’).
In addition, section 66A of the SSA Act requires anyone receiving a social security payment 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 section 66A of the SSA Act is most relevant to criminal prosecutions, it may also have implications for overpayments. The High Court of Australia has handed down judgments clarifying the prospective operation of the provisions only.
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 independent legal advice (from a community legal centre, Victoria Legal Aid or a solicitor, see Chapter 2.4: Legal services that can help for further information).
If you are advised that Centrelink is investigating whether you have complied with your notification obligations – or you are invited to attend Centrelink for a voluntary recorded interview regarding your notification obligations – you should immediately seek independent legal advice (see Chapter 2.4: Legal services that can help).