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 [1]. 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://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