This document outlines the policy for handling overpayments made under the Veterans’ Entitlements Act 1986 (VEA). The intended audience of the document are delegates, and those who manage overpayments made to veterans and their dependants.
Once it has been established that an overpayment has taken place, and the amount of that overpayment has been calculated, the overpayment must either be:
This document outlines the Repatriation Commission’s (the Commission) policy on when each of these options should be pursued. The policy is high level and strategic in nature. It is designed to provide guidance to allow maximum flexibility for business areas to manage overpayments where supported by the provisions in the VEA and the Public Governance, Performance and Accountability Act 2013 (PGPA Act). The policy takes into account the Commission’s obligation to pursue the recovery of public money owed to the Commonwealth and sets out circumstances in which it may be appropriate to defer, write-off or waive a debt to the Commonwealth.
This document does not provide guidance on the following:
For information on these, consult the relevant procedural documents managed by the Client Benefits Division.
Generally speaking, an overpayment will occur when a client is paid more than they are legally entitled. Such an overpayment creates a debt for that person, which is owed to the Commonwealth.
Section 205(1) of the VEA provides an exhaustive list of the types of overpayments and debts that can be dealt with under the VEA. In accordance with s 205(1), this document deals with overpayments and debts that arise where:
(a) in consequence of a false statement or representation, or of a failure or omission to comply with the VEA, an amount has been paid by way of pension, allowance or other pecuniary benefit under the VEA that would not have been paid but for the false statement or representation or but for the failure or omission; or
(b) an amount has been paid to a person under a prescribed educational scheme that was not lawfully so payable; or
(c) an amount has purported to have been paid by way of pension, allowance or other pecuniary benefit under the VEA, the Social Security Act 1991, the Social Security Act 1947 or the Seamen’s War Pensions and Allowances Act 1940 that was not lawfully so payable; or
(ca) an amount has been paid by way of family assistance under the family assistance law that was not lawfully so payable; or
(cb) an amount has purported to have been paid by way of parental leave pay that was not lawfully so payable; or
(cc) an amount has purported to have been paid by way of dad and partner pay that was not lawfully so payable; or
(cd) an amount of compensation (within the meaning of the Military Rehabilitation and Compensation Act 2004 (MRCA)) has been paid under the MRCA that should not have been paid; or
(d) an amount has been paid, whether before or after the commencement of section 32 of the Veterans’ Affairs Legislation Amendment Act 1988, by way of pension, allowance or other pecuniary benefit under this Act, the Social Security Act, the Social Security Act 1947 or the Seamen’s War Pensions and Allowances Act 1940, and the payment of that amount has since become an unauthorised payment; or
(e) a person has incurred a debt under another Act (whether before or after the commencement of this paragraph) for failing to repay part or all of an amount that has been paid as described in paragraph (b); or
(f) a person has incurred a debt under the Social Security Act 1991 (whether before or after the commencement of this paragraph) for failing to repay part or all of an amount that has been paid as described in paragraph (c) or (d); or
(fa) a person has incurred a debt under subsection 204(2) of the VEA; or
(g) a person has received an advance payment of pension under Part II, III or IV of the VEA or of income support supplement.
(1AB) If:
(a) a person has received an advance payment of a pension under Part II, III or IV of the VEA, or of an income support supplement; and
(b) the pension or income support supplement ceases to be payable to the person; and
(c) at the time when the pension or income support supplement ceases to be payable the person has not repaid the whole of the advance payment;
the amount that has not been repaid is a debt due to the Commonwealth.
A debt must be raised and then either recovered, written off, deferred, or waived. It must not be ignored. As discussed below, DVA has a legal obligation to pursue the recovery of a debt under the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule) unless a specified exception applies.
Recovery of overpayments is important to ensure that clients receive the correct rate of payment and that inappropriately, incorrectly or unlawfully paid Commonwealth money is recovered by the Commonwealth. This allows DVA to make sure its clients receive all the lawful financial entitlements that are justifiable and consistent with the relevant statutory requirements.
Write off or deferral stops recovery action for an undefined period. At any time, the write off or deferral can be reversed and recovery proceedings can begin where the client’s financial circumstances change and recovery may be possible. Unlike a waiver, write off does not extinguish the debt.
Waiver amounts to a permanent bar to the future recovery of the debt. Once the debt has been waived, recovery of the debt cannot be pursued at a later date.
If a debt is written off or waived under the VEA the PGPA Rule requirement to recover the monies owed to the Commonwealth will not apply.
The policy of the Commission is that delegates should first consider recovery then, if appropriate, deferral, then write-off, then waiver.
Unless there are sufficiently good reasons, an overpayment must be recovered. If there are such reasons, a write off or deferral may be considered in the first instance. Only if there is sufficiently good reason why a write-off or deferral is not appropriate should a delegate consider full or partial-waiver of the debt.
This document outlines the circumstances for when a write off can be undertaken rather than recovery, and the circumstances for when a waiver is to be preferred over write-off.
A debt can be deferred or waived in part or in whole. The part of the debt that is neither deferred nor waived must be recovered.
The Public Governance, Performance and Accountability Act 2013 (PGPA Act) [2] imposes obligations on the accountable authority of a non-corporate entity. In relation to DVA, this is the Secretary of the Department. The Repatriation Commission (Commission) is a body corporate that is taken to be a part of the Department for the purposes of the PGPA Act (section 179A of the VEA). Officers of the Commission are officials of DVA for the purposes of the PGPA Act and are subject to the PGPA requirements to deal with Commonwealth monies and resources ethically and responsibly.
While the PGPA Act provides a backdrop to the management of Commonwealth monies, officers recovering overpayments, or writing off, deferring or waving debts under the VEA are exercising powers under those Acts not the PGPA Act. They will be delegates of the Commission under the VEA.
Section 11 of the PGPA Rule provides:
The accountable authority of a non-corporate Commonwealth entity must pursue recovery of each debt for which the accountable authority is responsible unless:
(a) the accountable authority considers that it is not economical to pursue recovery of the debt; or
(b) the accountable authority is satisfied that the debt is not legally recoverable; or
(c) the debt has been written off as authorised by an Act.
The write off and deferral provisions in the VEA are authorisations contemplated in paragraph (c). This means that where a debt has been written off or deferred under the VEA, the Secretary is not required to pursue the recovery of the debt under s 11 of the PGPA Rule, while the debt remains written-off or deferred.
Section 11 does not mention waiver, as when a debt has been waived the debt no longer exists and section 11 will not apply.
Section 63 of the PGPA Act provides the authority for the Finance Minister to waive the right of the Commonwealth to recover amounts that are due and owing to it. This waiver power operates separately to the waiver power in the VEA. If the Finance Minister waives a debt under the PGPA Act, the debt is taken to no longer exist and there is no longer a debt to be pursued under the PGPA Rule or the VEA.
In this chapter -
It is important that the individual circumstances of the client and the reasons and circumstances surrounding the overpayment are not assumed. In most cases it will be distressing for the client to discover that they have been overpaid and that they may/will be the subject of recovery action. Delegates should be aware of this and handle overpayment cases in a sensitive manner.
What action will be appropriate and reasonable will depend on the circumstances, such as whether the overpayment is the result of inadvertence, departmental error or fraud and the known state of the client’s physical and mental health.
Early engagement is important and notification of the overpayment must be provided to the affected client, including the details and circumstances of why the overpayment occurred.
Recovery should be made with regard to the following principles.
Principle 1: an overpayment should be recovered only if it is economically viable for DVA to pursue the recovery of this debt. |
When deciding whether this is the case, the following factors should be taken into account:
If a delegate determines that it is not economically viable to pursue the recovery of a debt, they should then consider whether it would be appropriate to defer or write-off the debt.
Principle 2: an overpayment should be recovered as soon as feasible, having regard to principles 3 and 4. |
Principle 3: the method and timing of recovery should be established with reference to the client's capacity to pay. |
It is important that at this stage, enquiries are made with the affected client about their financial circumstances (including income, other debts, assets and significant outgoings) if such information is not already held by DVA.
When seeking to recover, it is important to take into account whether ‘hardship’ will be caused. Generally, delegates should find that a person will suffer 'hardship', if:
Principle 4: when recovering an overpayment, reference should be made to the DVA Protocols for dealing with clients at risk. |
Under the Protocol for Dealing with Clients at Risk [3], a client is considered potentially at risk if they are seriously ill, vulnerable or at risk of self-harm or harm to others. The protocol outlines the steps to be taken when delivering advice to existing DVA clients considered at risk.
If an overpayment has not been wholly repaid or waived, the delegate must send the client a letter that complies with s 205AAA of the VEA.
The recovery notice must contain the following information:
The overpayment is due and payable 28 days after the date the notice is issued (s 205AAA(2)). This 28 day timeframe will not apply if the person otherwise enters into an arrangement with the Commonwealth to pay the outstanding amount. This could be an arrangement to pay the debt by instalments (s 206(1)(c)), or to have the amount deducted from a pension or other benefit payable under the VEA (s 205(2)). This 28 day period will also not apply if the debt is subsequently waived, written off or deferred.
If the debt remains wholly unpaid and the client failed to enter into an arrangement to pay the overpayment, or they entered into an arrangement but failed to make a payment then the Commission may give the person a follow-up notice in accordance with s 205AAA(3) of the VEA. Where a delegate sends a follow-up notice, this should contain the following information:
If a client is sent a follow-up letter, then they may become liable to pay interest under s 205AAB or administrative charges under s 205AAD. A client cannot be liable to pay interest or administrative charges unless they have been sent a follow-up notice under s 205AAA(3).
Section 206(2) of the VEA places a time limit on the recovery of overpayments by way of court proceedings. DVA has six years, from the first day on which an officer becomes aware, or could reasonably be expected to have become aware, of the circumstances that gave rise to the debt, to commence court proceedings for recovery of overpayments. If court proceedings have not been commenced within this six year period, DVA cannot recover a debt through court proceedings.
Note that DVA is not prevented from seeking to recover an overpayment after six years, however, it will be prevented from doing so through the commencement of legal proceedings. The effect is that if, after this 6 year period, the person who owes a debt does not voluntarily offer to repay the debt, and the only option is to seek a court order (such as a garnishee order), then the limitation period will apply to bar DVA from commencing court proceeding to obtain that order.
Where deductions have already commenced in relation to an overpayment of a DVA client, subsection 205(3) allows for the continuation of these deductions to recover the debt despite the 6 year limitation period for the institution of proceedings having expired.
A person does not have a right of review for a recovery decision under section 57 of the VEA. However, a client may seek a review of the decision that gave rise to the overpayment, i.e. the decision to retrospectively reduce the rate of payment and the date on which this reduction takes place.
DVA allows the following methods of recovery with regards to VEA debts in order of preference:
Recovery of an overpayment in a one off lump sum is obviously the most efficient and economical method for the Commonwealth.
In requesting a lump sum, a delegate should have reasonable regard to the amount of pension or other entitlements payable to the client, the client’s financial circumstances, and the client’s readily available funds.
If a full refund is not possible but the client has readily available funds equal to or more than 80 per cent but less than 100 per cent of the total debt, consideration should be given to offering a discount of up to 20 per cent on the total debt. In all circumstances when this offer is made and accepted, the 80 per cent or more of the total original debt must be paid within 30 days. The discount on an original debt does not apply to a person who has already entered into a recovery plan.
The offer can be made in respect of all types of VEA debts, except where the client or the estate has the capacity to repay the debt in full or the overpayment was caused by fraud.
The remaining 20% of the overpayment must be waived by way of a written determination under s 206(1)(b) of the VEA. See the section on waiving debts below.
If a client is in receipt of continuing payments from DVA but is unable to repay the debt in a lump sum, instalments may be paid in the form of deductions from their pension.
Paragraph 205(2)(c) of the VEA authorises the recovery of an overpayment from any pension, allowance or pecuniary benefit payable to the client under the VEA.
A limitation amount may be applied automatically. The following table shows the portion amounts to be applied to debts:
Excess payment | Limitation |
<$26 | One-off lump sum |
>$26 to <$500 | Amount of negative arrears over 6 months/13 fortnights |
>$500 to <$1000 | Amounts of negative arrears over 12 months/26 fortnights |
>$1000 to <$5200 | The lesser of the amount of negative arrears over 26 fortnights or a formulated rate |
>$5200 | No automatic portions. Delegate negotiates with client |
Income for the purposes of determining the rate of limitation includes pensions from all sources. It does not include allowances such as rent assistance, remote area allowance and additional payments for children, but does include the non-indexed component of the war widow’s/widower’s pension.
When advising a client that recovery of their overpayment will be effected by limiting their pension, it is important to advise that the situation will be reviewed regularly. Limitations automatically generated by the Debt Management Recording System must be reviewed if requested by the client.
If a full or discounted or partial lump-sum repayment is not feasible, and the client is not in receipt of a pension, negotiations with the client should begin with a view to recovering the debt by regular instalments from other income sources.
Section 206(1)(c) allows a delegate to make a determination in writing that a debt be repaid by instalments. This determination should state that it was made under s 206(1)(c) and should set out the frequency and amount required to be repaid. The repayments should be monitored closely by the responsible business area. A schedule should be provided to the client outlining the repayments required and the balances due as time elapses.
The written repayment agreement with the client must explain that DVA will review the rate of repayment periodically. A review of the rate of repayment should be conducted if the client defaults on payments or if a change in circumstances is detected.
If DVA is aware that the client’s financial circumstances are going to improve—for example, a loan will be paid out or their income is going to increase—the repayment agreement should be reviewed. It should be noted, however, that DVA cannot unilaterally change an agreement reached with a client, particularly if the client is honouring their obligations under the agreement.
In order to formalise an agreement for repayment of debt within a specified period in specified amounts, DVA may wish to enter into deeds of repayment with the relevant DVA client. A deed of repayment represents a legally binding promise from the debtor to repay the debt within a specified period.
The deed should include an acknowledgement of the debt by the debtor, which safeguards against the debtor disputing the liability for the debt.
The repayment obligations under the deed will give rise to a new cause of action against a debtor in the event they fail to meet their obligations, known as action for breach of a deed, and as for a breach of contract, remedies can include specific performance.
Consultation with the General Counsel Division must be made prior to this option being taken.
In the event that a client with an overpayment has either not entered into an arrangement to repay or has entered into an arrangement and has failed to repay an amount, the VEA provides for financial penalties to apply to the overpayment amount, including interest and administrative charges.
Section 205AAB sets out when a client is liable to pay interest on a debt. Section 205AAB applies to a person who:
The ‘final payment day’ is the later of the following days:
(a) the 90th day after the day on which the outstanding amount of the overpayment was due and payable;
(b) the 28th day after the date of the further notice given under subsection 205AAA(3).
A person is not liable to pay penalty interest on a debt or any portion of a debt that arose from administrative error made by the Commonwealth or an agent of the Commonwealth (subsection 205AAB(2A)).
Section 205AAC(1) provides the Commission with the power to make a determination that interest is not payable, or is not payable in respect of a particular period. The circumstances in which the Commission may make such a determination include, but are not limited to those in which it is satisfied that a person has a reasonable excuse for not entering into a repayment arrangement or not making a payment in accordance with the agreement
If a review of the decision that gave rise to the overpayment is favourable, any repaid amounts, including repaid penalty interest, must be refunded to the person.
Note that the VEA does not provide for a right of appeal against the imposition of penalty interest or administrative charges.
Section 205AAE of the VEA sets the penalty interest rate at 3 per cent a year. To calculate the penalty interest applied to a debt three steps should be taken:
Step 1: Determine the daily percentage rate = [annual interest rate expressed as a decimal]
divided by [365 days]
Step 2: Determine the penalty interest daily amount = [daily percentage rate]
multiplied by [amount of debt]
Step 3: Determine the amount of penalty interest to be added to the debt = [penalty interest daily amount] multiplied by [number of days being applied for]
Penalty interest is recoverable as if it were recoverable under section 205 of the VEA. Any repayments made by a person in relation to a debt reduce the original amount of the debt first. Once the original amount of the debt is wholly repaid, the repayments go towards reducing the penalty interest component and then any administrative charge.
The following table shows the order of recovery of a debt.
If any payments have been made | Reduce a debt by the amount paid |
Not wholly paid | Reduce original debt by the repayment amount until wholly repaid |
Wholly repaid | Reduce penalty interest debt by the repayment amount until wholly repaid |
Wholly repaid and penalty interest is wholly repaid | Reduce administrative charge debt by the repayment amount until wholly repaid |
An administrative charge is added to a debt when a person first becomes liable to pay penalty interest in respect of that debt. The administrative charge is a debt due to the Commonwealth and is recoverable under section 205 of the VEA as if it was a recoverable amount. It consists of a one-off charge of $50. The administrative charge is payable once interest is payable.
Where the preferred methods are not available a number of alternatives are permitted, including:
Payment notices constitute a simple and cost-effective way of intercepting money owed by a client, but they should be considered only when the client is not in receipt of a DVA payment or will not negotiate a reasonable settlement of the debt.
Section 205A of the VEA enables DVA to request, in writing, payment from any ‘person’:
(a) by whom any money is due or accruing or may become due to the client;
(b) who holds or may subsequently hold money for or on account of the client;
(c) who holds or may subsequently hold money on account of some other person for payment to the client; or
(d) who has authority from some other person to pay money to the client.
The request is effected by the issue of a written notice to this person, which includes, for example, an employer, a financial institution and the Australian Taxation Office. A copy of the notice must also be sent to the client.
The notice will require the person to pay the Commonwealth the amount specified in the notice (not exceeding the amount of the debt), or a specified amount out of each payment that the person becomes liable from time to time to make to the client until that debt is satisfied (section 205A(1)(e)-(f)).
The penalty interest and administrative charge should be added to the amount of the overpayment and be specified as part of the total amount in the payment notice.
The person must make the payment/s specified in the notice by the date specified in the notice, which must be at least 14 days after the notice is given (section 205A(2)).
It is a criminal offence for the person to fail to comply with the notice (section 205A(3)).
If a client is willing to have a limitation imposed to recover a third party’s debt, and consent is given in writing, deductions can be made from the client’s pension under section 205(2)(e) of the VEA.
A spouse may offer to repay their partner’s overpayment. Before DVA can accept, however, the spouse must be advised in writing that they are under no legal obligation to repay their partner’s overpayment and that consent can be withdrawn at any time. If consent is withdrawn, the client must be contacted and negotiations begun for recovery of the amount outstanding.
In some circumstances civil recovery can be sought through the courts, although this is a last resort. If you think legal action offers the best way of recovering debt or of potentially holding a charge over an asset in order to protect the Commonwealth’s interest, this should be discussed with DVA’s General Counsel Division.
When a person becomes bankrupt, management of their assets and debts passes to the Official Receiver in Bankruptcy or Trustee. The person’s assets may be used to repay debts. The bankruptcy of a client affects DVA’s methods of recovery. Any debt incurred before the date of the bankruptcy is subject to restrictions on its recovery under the Bankruptcy Act 1966.
If a client becomes bankrupt, DVA should not continue to recover an overpayment via deductions from the client’s payment, because a bankrupt client may not have the capacity to make debt repayments. Deductions should only continue if approved by the Trustee. In addition, there are payments such as compensation payments which cannot be garnished from a bankrupt.
In the event that DVA has commenced a debt recovery action, the recovery action and any contact with the client should cease as soon as DVA becomes aware of the bankruptcy. Any civil action being taken against a bankrupt client should also be reviewed in this circumstance.
Under subsection 153(1) of the Bankruptcy Act, the effect of a discharged bankruptcy proceeding is that the person is released from all debts provable in relation to any proceedings under the Act. This means that the debt cannot be pursued after the discharge by any of the creditors. This is particularly the case when the overpayment occurred before the person was declared a bankrupt. Subsection 153(2) provides a list of circumstances in which a bankrupt cannot be discharged from their debt. For example, where the overpayment occurred by fraud, and prosecution proceedings are to be commenced or have commenced.
Consult the General Counsel Division to discuss what to do when a client’s business has gone into administration and the implications of this for the recovery of payments.
When a client has died and there is an outstanding overpayment, a formal claim must be made on the estate. The deceased debtor’s family (including the client’s spouse or partner) are not personally liable for the debt and a family member should only be approached regarding the debt if they are the executor or trustee. Family members who are not the executor/trustee should not be contacted regarding the debt or asked to repay the debt.
If an overpayment has been raised after a client’s death but before the estate has been distributed, action can be taken to recover the debt. Action can also be continued against a deceased client’s estate to recover an existing departmental debt. The statute of limitations or time limits imposed by state and territory legislation are, however, applicable.
Whether action can be taken is contingent on whether there are identifiable traceable assets. An identifiable traceable asset is an asset that was once owned by the deceased but has passed to the beneficiaries by virtue of the deceased’s will or local intestacy rules (for example, shares, bank accounts, and real or personal property). Superannuation, insurance and compensation are not traceable assets.
The executor/trustee of the estate must be contacted in order for DVA to lodge a claim for the repayment of the debt. If the representative is not known, the Public Trustee, the Probate Office or the Official Trustee should be contacted for details of who is handling the estate. Alternatively, you can write to the executor of the estate at the deceased client’s last known address.
When a client dies and a decision made by the Commission in relation to that client is within the statutory appeal period, or when a formal claim on the estate serves as the first notification of the debt, the claim must provide details about the client’s rights of review.
If the trustee/executor is notified of a client’s debt after the estate has been distributed, the only remaining debt recovery option available to DVA is for a beneficiary of the estate (such as a family member) to make a voluntary repayment. The debt should normally be written off for 6 months to allow for a possible voluntary payment. If a voluntary repayment is not forthcoming, a waiver should be considered. The lack of capacity to recover is relevant to the exercise of the waiver discretion. It may be the case that a waiver is appropriate in the first instance, having regard to the circumstances of the individual case.
If there is no estate and no surviving family members, such that there is no prospect of receiving a voluntary repayment, this will be relevant to the waiver discretion such that the debt would normally be waived.
In accordance with section 205AB of the VEA, if a person dies prior to a payment being made into their bank account, the Commission can send the financial institution a written notice requiring it to pay the Commonwealth the lesser of the following amounts:
The written notice must include details about the payment and it must note that the person died before the payment was made. The financial institution is then required to comply with the notice (subsection 205AB(3)).
As soon as possible after sending a notice under subsection 205AB(2), the delegate must inform the deceased person’s estate in writing of the amount sought to be recovered from the deceased’s estate and the reasons for the recovery action (subsection 205AB(2A)).
In order to defer the recovery of all or part of a debt on behalf of the Commonwealth, the Commission or a delegate of the Commission must make a determination in writing under section 206(1)(b) of the VEA. The debt continues to be legally recoverable but recovery action will not occur for the period of deferment.
Deferral is justified in a number of situations, including where:
A determination to write off a debt must be made in writing under section 206(1)(b) of the VEA. A decision to write off a debt means that any recovery action ceases. Such a decision is made where circumstances make debt recovery not favourable or legally practicable. A write off does not extinguish the debt and it may be pursued at a later date should the debtor’s circumstances become more favourable. A write off can be in place indefinitely (noting that the circumstances of a debtor may never change), although DVA has a six year limit on the recovery of overpayments by way of court proceedings.
A written-off debt can be re-instated and pursued at any time when a debtor’s capacity to repay improves. For example, if the debtor lodges a successful claim for income support or receives a lump sum from an estate, recovery action should begin. Any such recovery action is, however, constrained by the six-year statute of limitations for the recovery of overpayments by way of court proceedings contained in section 206(2) of the VEA.
For taxation purposes where a debt is written off, the amount overpaid is still assessable income but may become non-assessable should the amount be repaid at a later date. If this occurs, the amount repaid would reduce the income taxed in the year of assessment and not the year of repayment.
A decision to write off an overpayment arising under, or as a result of, the VEA must be determined under section 206(1)(a) of the VEA. Only a person at particular level is delegated to exercise the Commission’s power to write off a debt.
The relevant levels and the maximum amounts these delegates are authorised to write-off are set out in the Commission’s instrument of delegation. Delegates can find a copy of the most recent delegation instrument in TRIM or on DVA’s intranet.
The amount of debt at the time the delegate is considering a waiver should be used as a guide in determining who should exercise the delegation i.e. if a client has a $200,000 debt at that particular time but $50,000 is being written off, only a person with the delegation to make a decision in relation to a $200,000 debt should exercise the waiver power.
It should be noted that a decision not to write-off a debt can also only be made by a person who holds the necessary financial delegation.
The Commission has a broad power in section 206(1)(a) to write-off debts that have arisen under the VEA. There are no legislative criteria that must be met before a debt can be written-off. However, as a matter of policy, a debt should only be written-off if all appropriate recovery action has been considered and recovery is not possible at the time the matter is assessed.
There are no necessary and sufficient criteria for determining if a write-off is appropriate and the delegate must use judgment given the individual circumstances. However, the following criteria may be used as a guide for when a write-off could be undertaken:
Note, however, that the above circumstances are circumstances at the time write-off is being considered but that the circumstances may possibly change in the future.
Capacity to pay is inclusive of both financial and mental capacity.
If the debtor is suffering or would suffer financial hardship if the overpayment were recovered, then it is appropriate to consider a write-off. When assessing financial hardship the following factors should be considered:
Delegates can consider other compassionate and compelling circumstances impacting on the client’s capacity to repay the debt.
All reasonable efforts should be made to locate the client before write-off is considered. However, the cost effectiveness of pursuing recovery must be kept in mind where extensive inquiries may be necessary.
The extent of the inquiries to be made should be determined by taking into account the amount of the overpayment outstanding, the age of the overpayment, the period since any recovery action was made, and the circumstances of the client such as the likely prospect of recovery being made.
The general principle in relation to overpayment recovery is that recovery action should be cost effective. When deciding whether recovery is cost effective, the following factors should be considered:
In certain circumstances, a debt may be partially recovered and the balance of the debt written off when the sources for recovery have been exhausted.
An overpayment should not be written off where recovery action is in place, regardless of the amount of the overpayment or the cost effectiveness of recovery action, e.g. a client is making repayments or limitations have been imposed on a current pension.
Write off action should not be considered where successful recovery of an overpayment would be effected under the provisions of section 205A of the VEA, i.e. by issuing a payment notice.
A write-off should not be considered where the overpayment arose because of:
If the client knew they were not entitled to a payment or could reasonably be expected to have known that, they cannot be said to have received the payment in good faith.
Use of the power to write-off a debt is entirely discretionary and a client has no right to insist that consideration be given to exercising these powers. However, where an officer does refuse to exercise these powers (while not merits reviewable internally, by the VRB or AAT) the decision not to consider writing-off a debt will be an administrative decision which will be reviewable by the courts under the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act).
Likewise, if an officer does consider whether a debt should be written-off under the VEA that decision will not be merits reviewable either internally, by the VRB or by the AAT. However, the decision will be reviewable by the courts under the ADJR Act.
Under the section 206(1)(b) of the VEA, the Commission has a broad discretion to waive the right of the Commonwealth to recover the whole or part of an overpayment. A determination to waive a debt under section 206(1)(b) must be made in writing. This has the effect of permanently extinguishing the debt that arose from overpayment.
Only a person at particular level is delegated to waive a debt under s 206(1)(b) on behalf of the Commission.
The relevant levels and the maximum amounts these are authorised to waive are set out in the Commission’s instrument of delegation [4]. Delegates can find a copy of the most recent delegation instrument in TRIM or on DVA’s intranet.
The total amount of the debt at the time waiver is being considered should be used to determine who should exercise the delegated power e.g. if a client has a $200,000 debt but $50,000 is being waived, only a person with the delegation to make a decision in relation to a $200,000 debt should exercise the waiver power.
It should be noted that a decision not to waive a debt can also only be made by a person who holds the necessary financial delegation.
The Commission has a broad power under section 206(1)(b) to waive debts that arise under the VEA. There are no legislative criteria that must be met before a debt can be waived. However, as a matter of policy, a debt should only be waived if all appropriate recovery action has been considered and a write-off is not appropriate.
Under section 206(1)(b) of the VEA the Commission may waive the right of the Commonwealth to recover:
At present the following classes of debts have been specified for ministerial waiver:
There are further circumstances in which an overpayment may be waived:
Further guidance on each of these conditions is discussed in the Overpayment Management Manual.
There are circumstances in which an overpayment should be waived, including where:
In addition, if the delegate has provided the client with a discount for a one-off payment, then the discounted amount must be waived.
If a debt is raised as a result of the restructure of a non-compliant self-managed superannuation or small APRA fund 100 per cent asset test–exempt income stream, the debt may be waived if the circumstances that created the debt meet the criteria set out in the Veterans’ Entitlements (Class of Debts—Self Managed Superannuation and Small APRA Funds) Specification 2012.
All cases where this situation arises should be referred to the Investment Database Unit.
A debt should be waived if a delegate determines that extreme or unusual circumstances exist 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. The following are examples of such circumstances:
If a debt does not fit into any of the foregoing categories but a delegate considers it would be otherwise unreasonable for DVA to pursue recovery, waiver of the debt may be considered.
Under this category of waiver, a decision can only be made by the Repatriation Commission.
For a debt to be waived because of an administrative error on the part of DVA, two conditions must be met:
When an overpayment is increased because DVA failed to act on a client’s advice about a change in circumstances in a timely manner, the portion of the overpayment caused by the administrative delay may be considered for waiver. That portion of the overpayment is taken to be the portion commencing on the day immediately following DVA receiving notification of the change in circumstances.
The part of the amount owing that was caused by administrative delay may be waived only if the four following conditions are all met:
A debt cannot be waived under the administrative delay criterion when a client fails to notify DVA of an event that would reduce their payments and this is not discovered until action is taken—for example, data matching, a denunciation, a third party notification, or a department-initiated action. The overpayment is calculated from the date of the event up to and including the day before the payment is reduced to the correct rate.
There are two special circumstances in which a waiver may be applied to an overpayment under the VEA:
Income tax can be overpaid when an overpayment of income support payment or incapacity payment occurs and has been repaid in full. Since their income (that is, their income support payment) has been reduced, the pensioner might have paid too much tax and be eligible for a re-assessment of their tax liability. The Australian Taxation Office (ATO) can, however, only retrospectively review tax liability for up to four years. This can result in a situation where a pensioner is liable to repay an overpaid income support payment and, because the overpaid period falls outside the four-year rule, is unable to apply to the ATO for a refund even though their actual income was reduced for that period.
DVA clients are advised in their first debt notification letter that when they make repayments, their taxable income is effectively reduced for the financial years in which the overpayment occurred and are encourage to discuss this matter with their financial adviser or the Australian Tax Office.
For the purposes of tax liability, discounted debts will be deemed to have been repaid in full; that is, amended tax statements will be provided for the total amount of debt. This ensures that overall the Commonwealth does not profit from the debt recovery by the ATO collecting more tax at the higher rate of taxation than the client receives in a DVA pension.
Notional entitlement refers a benefit which a person would have been entitled to receive had they made a claim for it.
When calculating a client’s debt arising from an overpayment of a benefit, it is important to establish whether the client had a notional entitlement to another type of benefit during the same period of the overpayment. A client might be overpaid payment A because of a loss of eligibility to receive payment A and yet be eligible for another payment, payment B, during that period. This is called a notional entitlement, and it may be used to offset the debt. The debt will be the difference between payment A and payment B for the relevant period.
For example, a partner service pensioner (PSP) who is divorced but continues to receive PSP pension might have had a concurrent entitlement to age pension under the Social Security Act for the same period he or she was overpaid the PSP pension (overpayment period). If Centrelink grants the person an age pension, provided they would have been entitled to receive the age pension during the overpayment period, 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.
However, careful consideration needs to be given to the particular circumstances of each individual case when deciding whether to waive a debt arising from an overpayment of a benefit on the basis that a person had a notional entitlement to another benefit during the same period. If the overpayment was obtained by fraud or misrepresentation or a failure to comply with a requirement of the VEA, it may not be appropriate to waive the debt, even if there was a notional entitlement to another benefit in the same period as the overpayment.
A waiver should not be considered where the overpayment arose because of:
If the client knew they were not entitled to a payment or could reasonably be expected to have known that, they cannot be said to have received the payment in good faith.
Use of the power to waive a debt is entirely discretionary and a client has no right to insist that consideration be given to exercising these powers. However, where an officer does refuse to exercise this power (while not merits reviewable internally, by the VRB or AAT) the decision not to waive the debt will be an administrative decision which will be reviewable by the courts under the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act).
Likewise, if an officer does consider whether a debt should be waived under the VEA that decision will not be merits reviewable either internally, by the VRB or by the AAT. However, the decision will be reviewable by the courts under the ADJR Act.
In Falconer and SDSS (1996) 41 ALD 187, the Administrative Appeals Tribunal found that the question to ask in determining whether a client has received a payment in good faith is, essentially: '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:
For any other policy matters that are not covered in this document, please contact Policy Development Branch for assistance.
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16761%23comment-form
[2] https://www.legislation.gov.au/Details/C2013A00123
[3] https://intranet.dvastaff.dva.gov.au/supportingbusiness/emergency/Documents/Forms/DispForm.aspx?ID=46
[4] https://intranet.dvastaff.dva.gov.au/supportingbusiness/legalservicesgroup/delegations/Documents/Instrument%20No.%20R1%20of%202019%20-%20Delegation%20-%20Powers%20and%20functions%20of%20the%20Commission%20under%20the%20VEA.tr5