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7.18.8 Categories of waiver

The following categories of waiver are covered in this section:

Note:That the waiver guidelines will generally not be required where an overpayment is being automatically recovered by DMRS. However, the waiver guidelines are available and should be employed if waiver action is deemed necessary under any circumstances. For more information on DMRS, the DMRS systems manual may be obtained from the Department's intranet site.    

Administrative Error

7.18.8.1Three conditions must be met for a debt to be waived under this criteria:

  • firstly, a debt must be caused wholly by administrative error on the part of the Australian Government. It is not sufficient for the debt to be caused partly or mainly by administrative error, i.e. it does not include situations where the client contributed to the cause of the overpayment to any extent, whether knowingly or unknowingly;
  • secondly, the payment(s) must have been received by the client in good faith. This means that there is no fault on the part of the pensioner and they could not have known or be reasonably expected to have known that they were not fully entitled to the payment(s). Some examples of what constitutes good faith are outlined below.
  • thirdly, if a debt is not discovered and raised within 6 weeks of it first occurring (or from the end of the notification period if obligations were fulfilled) then the whole debt must be waived, providing the elements of administrative error and good faith are present. Therefore, the period for which a pensioner can be penalised for a departmental error if good faith is accepted is capped at 6 weeks.

What constitutes 'Good Faith'?

In Falconer and SDSS (1996) 41 ALD 187, the Federal Court held that the question to ask in determining whether a client has received a payment in good faith is: 'did the client know that the amount had been paid contrary to the Act?'

If a client knows that he or she is not entitled to a payment he or she has received, the client cannot be said to have received the payment in good faith.

There must be evidence to support a decision to accept good faith, and the matter may need to be discussed with the client. The decision maker must look to what the client was reasonably expected to have known. Knowledge or notice of an irregularity in the payment is not enough to establish that the client lacked good faith. It is essential to consider all the circumstances of the case, including:

  • the complexity of the case
  • the debtor's age, health and level of family support in determining whether the debtor should/could have understood that they were receiving the incorrect rate of payment
  • information given to the client in the form of letters and other literature, complete obligations, income and assets statements, interviews, and phone contact, which may help to establish the client's reasonable expectation about their payments. The frequency and timeliness of this contact should also be considered
  • information provided by the client about their circumstances, which may help establish the client's expectations about future payments and the impact of the new information they provided to DVA. The delegate should also consider the frequency of contact with the Department
  • the client's regular pattern of payment – what would they reasonably expect to receive on a regular basis? What would be an unexpected payment or amount?
  • the amount of the excess payment – A large amount might be expected to be questioned by the client
  • the period of time the incorrect payments were made – a short period could be considered by the client to be administrative delay in actioning new information while a longer period may not
  • in some cases, it may be necessary to also consider the client's literacy level in assessing whether they were aware they were being overpaid.
Extreme or Unusual Circumstances

7.18.8.2A debt should be waived where a delegate determines that extreme or unusual circumstances apply, and it would be unreasonable to pursue recovery of the debt. For this provision to apply, the circumstances need to be unusual, uncommon or exceptional.

7.18.8.3Circumstances where it may be appropriate to waive recovery are as follows:

  • where a debtor is convicted of an offence and in sentencing, the court ordered a term of imprisonment to be served in lieu of repaying the debt. This is distinct from a sentence of imprisonment for the offence committed or failure to pay fines and costs. Where the reason for imprisonment is not clear, the advice of the Department of Public Prosecutions should be sought.
  • where there are compelling and compassionate reasons, e.g. a debtor may have funds to repay the debt but they are seriously or terminally ill and it is considered that the funds may be required for treatment or funeral costs. The delegate may be satisfied that partial repayment is acceptable as full repayment. The balance of the debt or debts may be waived.
  • Where a debt has been raised against a pensioner and the debtor dies leaving no estate, and there is no likelihood of a family member making a voluntary repayment.

Note:These examples are not exhaustive. There may be other situations that constitute extreme or unusual circumstances. A delegate should apply his/her discretion in determining whether circumstances are extreme or unusual.

Administrative Delay

7.18.8.4Where an overpayment is increased because the Department failed to action an advice from a pensioner regarding a change in circumstances in a timely manner, the portion of the overpayment caused by the administrative delay may be waived. The portion of the overpayment caused by administrative delay is taken to be the portion occurring more than six weeks after the Department receives advice of the change in circumstances.

7.18.8.5The part of the amount owing caused by administrative delay may be waived only if all four of the following conditions have been met:

  • there has been no attempt to deceive or defraud the Department
  • the pensioner did not know they were receiving the incorrect rate of payment (i.e. it was received in good faith)
  • the pensioner has notified a change in circumstances (within or outside of the notification period); and
  • the Department fails to action the pensioner's advice of a change in circumstance within six weeks of receiving the advice.

7.18.8.6In practice, this means that debts exacerbated by administrative delay, in most cases, will still be recovered. This is because the pensioner concerned will normally be aware that their entitlement should have been reduced due to the event causing the notification.

7.18.8.7A debt cannot be waived under this criteria where a pensioner does not notify of an event that would reduce their payments, and this event is not discovered until some departmental action is taken, e.g. data matching, a denunciation, a third party, or a Departmental Initiated Action (DIA). This exemption applies even where administrative delay compounds the amount of overpayment. In these cases, prior to 13 July 1999 the overpayment is calculated from the day following the event to the day the payment is reduced to the correct rate, and must be fully recovered. From 13 July 1999, the overpayment is calculated from the date of event, up to and including the day before the day that the payment is reduced to the correct rate.

Note:These guidelines replace DI B18/95.

Example 1 – notification within the notification period

The pensioner's circumstances change on 9 October 2006. As a result, he is entitled to a slightly lower rate of pension. The notification period ends on 23 October. He notifies of the change in circumstances on 12 October, and his pension is reassessed on 20 December. A debt is raised for the period 24 October to 18 December. The portion from 5 December (ie 6 weeks after 24 October) to 18 December is waived because the payment was received in good faith and the pension was not reassessed within 6 weeks of notification.

Example 2 – notification received outside the notification period

The pensioner's circumstances change on 9 October 2006. As a result, he is entitled to a slightly lower rate of pension. The notification period ends on 23 October. He notifies of the change in circumstances on 30 October, and his pension is reassessed on 20 December. A debt is raised for the period 10 October to 18 December. The portion from 11 December (ie 6 weeks after 30 October) to 18 December is waived because the payment was received in good faith and the pension was not reassessed within 6 weeks of notification.

Discounting

7.18.8.8The part of the amount owing which has been discounted must be waived only if:

  • there has been no attempt to deceive or defraud the Department; and
  • the debtor has readily available funds equal to 80% or more but less than 100% of the total debt; and
  • the debtor has not already entered into a recovery payment plan with the Department; and
  • full repayment of the agreed amount has been received in a lump sum within a period specified by the delegate.
Overpaid Tax Amount

7.18.8.9Where a person has been overpaid income support pension that has been repaid in full, and:

  • the overpaid period is in excess of 4 years; and
  • the person had a tax liability during the overpaid period; and
  • the tax liability cannot be adjusted;

that amount of the debt equivalent to any tax 'overpaid' by the debtor must be refunded under the act of grace provisions (section 33 in the Financial Management and Accountability Act 1997 refers).

7.18.8.10Where a person has been overpaid income support pension that has not yet been fully recovered, the amount of the debt equivalent to any tax 'overpaid' by the debtor that is attributable to the 4-year rule, is to be waived.

Note:For detailed procedures relating to the waiver of overpaid tax please refer to DI C22/96.

Notional Entitlement

7.18.8.11Where a cancelled pensioner has a notional entitlement to another income support payment, the notional entitlement may be offset against the overpaid pension. For example, a partner service pensioner who is divorced without his or her knowledge, but continues to receive PSP for some time may have a concurrent entitlement to age pension under the SSA. If Centrelink grants the person a pension, their 'notional entitlement' may be considered as established and an equivalent amount for the period in question may be offset against the VEA debt by waiving that amount.

Other Reasons

7.18.8.12Where a debt does not fit into any of the above categories but a delegate believes that it would be otherwise unreasonable for the Department to pursue recovery, waiver of the debt may be considered. However, it should be noted that under this category of waiver, delegation to exercise discretion is limited only to the President, Deputy President, Deputy Commissioner, Division Head Compensation and Support, Branch Head Income Support and Branch Head Disability Compensation. For information on the standardised national waiver delegations, refer to this manual's Section 7.20 'VEA Delegations' in this chapter.

Debts Under $200

7.18.8.13Where a debt is, or appears likely to be, less than $200, consideration should be given to whether or not it is cost effective to pursue. This provision only applies to manually processed debts which require manual calculation and generation of advice letters. In practice, all debts calculated automatically through PIPS processing can be recovered because it is cost effective to do so. A debt which is less than $50 may be waived if the debtor is no longer in receipt of income support.

7.18.8.14The decision to waive debts in this category is taken because the administrative cost of establishing, maintaining and recovering the debt is considered to be greater than the value of the debt. The delegate should consider in each case, whether the amount involved is worth the overall cost to the Commonwealth. Factors to be considered include:

  • the likely amount of the debt
  • the cost of investigation, e.g. whether third parties need to be contacted for verification
  • the time it will take to calculate the debt
  • what is involved in raising the debt, i.e. formally recording the debt and advising the debtor
  • how easy it is to recover.

7.18.8.15Generally, where the debtor has a continuing entitlement to a DVA payment it will be cost effective to raise the debt because it can be recovered by limitations. However, other considerations, as mentioned above, must be taken into account.

7.18.8.16It is not appropriate to take account of 'possible' costs of a request for review or appeal. However, if there is insufficient documentation to sustain a debt and it would be costly to obtain it, the debt should be waived.

Debts Incurred by Persons Adversely Affected by the 2009 Victorian Bushfires

7.18.8.17Legislative Instrument R49/2009 Veterans' Entitlements (Class of Debts – Victorian Bushfires) Specification 2009 enables the Commission to waive the Commonwealth's right to recover debts under the VEA, incurred by persons who were adversely affected by the 2009 Victorian bushfires.

7.18.8.18A debt is in the specified class if:

  • it was incurred by a person for a period that occurred wholly or partly during the bushfire period beginning on 29 January 2009 and ending 29 April 2009 (inclusive of both dates);
  • the person was adversely affected by the bushfires in Victoria during the bushfire period; and
  • if the debt was incurred for a period occurring partly during the bushfire period – it is the part of the debt attributable to days occurring in the bushfire period which is covered by the Specification.

7.18.8.19Adversely affected by the bushfires in Victoria is defined in the Specification and means, if, as a direct result of the bushfires:

  • the person was seriously injured; or
  • an affected family member of the person was killed; or
  • the person's principal place of residence sustained major damage; or
  • the person was unable to return to his or her principal place of residence for at least 24 hours; or
  • a utility failure occurred in the person's principal place of residence; or
  • the person experienced psychological trauma.
  • For the definition of adversely affected by the bushfires in Victoria to be met, it is intended that a casual relationship must exist between the bushfires and any of the circumstances listed in the definition. All relevant definitions can be found in the Specification which is located in the CLIK Legislation Library under Topics by Acts/Veterans' Entitlements/Instructions.

7.18.8.20Debts incurred by a person who knowingly made a false or misleading statement to the Commission or to a person who worked for the Commission, or who knowingly provided false information to the Commission or to a person who worked for the Commission, in relation to that debt; or a debt incurred under Division 3 or 4 of Part IIIC of the VEA (Compensation recovery) are not covered by the Specification.

7.18.8.21The Specification only covers debts under the VEA. Debts under MRCA must be considered on a case by case basis for waiver by the MRCC. Debts under SRCA must be considered on a case by case basis for waiver by the Secretary, for the Commonwealth.

Waiver of Debts – self managed super fund and small APRA fund 100% asset-test exempt income streams

7.18.8.22Where a debt is raised due to the restructure of a non-compliant self managed superannuation or small APRA fund 100% asset-test exempt income stream, the debt may be waived if the circumstances which created the debt meet the criteria set out in the Veterans' Entitlements (Class of debts – Self Managed Superannuation and Small APRA Funds) Specification 2009. This waiver is being provided in recognition of the impact of the global financial crisis of 2008 and 2009 on financial markets. The relief arrangements are in place for the 2008/09 and 2009/10 financial years and expire on 30 June 2010.

7.18.8.23Generally, if an asset-test exempt income stream sourced from a self managed superannuation fund or small APRA fund is restructured to form a market-linked income stream, the income stream should be retrospectively reclassified as an asset-tested (long term) income stream. A retrospective debt to the Commonwealth would be raised if the pension the person received exceeds what they would have received if the income stream had always been assessed as asset-tested (long term).

7.18.8.24Under the temporary relief arrangements, the debt may be waived if the following criteria are met:

  • the debt results from commutation of an asset-test exempt income stream contrary to the income stream's contract or governing rules (subsection 5JA(2), 5JB(2) of the VEA); and
  • the debt did not arise because the person knowingly made a false or misleading statement to the Commonwealth, or the Commission, or to a person acting on behalf of the Commonwealth or the Commission, or because the person knowingly provided false information to the Commonwealth, or the Commission, or to a person acting on behalf of the Commonwealth or the Commission; and
  • the income stream meets the criteria in paragraph 7.18.8.20.

7.18.8.25The debt relief will only apply to an income stream that;

  • immediately before the date that the Veterans' Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2009 was signed, was either:
  • an asset-test exempt income stream; or
  • an asset-tested income stream (long term) that was previously an asset-test exempt income stream which failed to meet the 'high probability' test (described in this reference in the CLIK Policy Library); and
  • was sourced from a self managed superannuation fund or small APRA fund; and
  • on or after 1 July 2008 – was unable to provide a current actuarial certificate for either the 2008/09 or 2009/10 financial year that states that in the actuary's opinion there is a high probability that the provider of the income stream will be able to pay the income stream as required under the contract or governing rules (this is known as the high probability test), and
  • after the date the Veterans' Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2009 was made – was an account based market-linked income stream within the self managed superannuation fund or small APRA fund.

7.18.8.26All cases should be referred to the Investment Database Unit, NSW Office.