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7.6.1 Overview new penalty interest and administrative charge was introduced via the 1999/2000 Budget measure known as 'Enhanced Debt Recovery'. The measure removed the old administrative charge on debts outstanding for more than 3 months. The aim of the changes was to overcome the inequity of imposing an administrative charge on a debtor who could not afford to repay a debt within three months, but who was making an effort to repay. The penalty interest charge is levied only on those who are attempting to avoid timely repayment. A summary of the old rules prior to 1 July 2001 are in this manual's Section 7.6.9 Summary of old administrative charge. interest can be applied to debts if:

  • the debtor is no longer in receipt of a DVA or Centrelink payment; and
  • fails to enter into a repayment arrangement; or
  • breaks an existing repayment arrangement.