6.7.3.08 Statutory Limitation Period

Summary

A debt may be written off for an indefinite period. However, if no action has been taken after 6 years since the start of the debt, the debt will often be deemed irrecoverable at law. At any time, the write off can be reversed and recovery proceedings begun where circumstances change. Unlike a waiver, write off does not extinguish a debt.

Six year limitation period

As a general rule, the recovery powers in social security law (withholding, garnishee and legal proceedings) can only be used if there has been recovery action on a debt within 6 years of the start of the debt.

The 6 year period starts on the first day an officer becomes aware of the circumstances that gave rise to a debt, or could reasonably have been expected to have done so.

The period can be extended if there has been some activity on the debt during that 6 year period. Every time that any activity (such as recovery action) takes place within the initial 6 year period, a new 6 year period begins. In effect, this means that since any action extends the 6 year period, recovery can be extended indefinitely. Nevertheless, Centrelink is expected to recover the debt within the shortest possible time-frame.

The 6 year limitation period is renewed whenever:

• a repayment is made (this includes a withholding), or
• the person acknowledges that they owe the debt, or
• legal action or garnishee action is taken, or
• a file review relating to action for the recovery of the debt occurs, or
• other internal departmental activity relating to action for the recovery of the debt occurs.

If departmental activity (including file review) were begun within the initial 6 year period, the limitation period would be extended a further 6 years. Each resulting recovery action or debt repayment would begin another 6 year period, as above. However, if departmental activity were the only action taken, or this did not result in any debt recovery, the extended 6 year period would be seen as lapsed, and the debt irrecoverable at law.

Once the statutory 6 year period has expired, compulsory recovery cannot be pursued. However, Centrelink can still accept voluntary repayments of the debt. Voluntary repayments do not change the status of the debt.

Although a debt may be irrecoverable at law due to the expiration of the 6 year period, the debt still exists and recovery may be waived where appropriate.