6.7.3.40 Waiver of debt on the basis of special circumstances

Summary

All or part of a debt may be waived where the circumstances make debt recovery inequitable. This is provided special circumstances exist (other than financial hardship alone) that make it desirable to waive the debt, it is more appropriate to waive than to write off the debt, and ONE of the following applies:

• The debt did not result (wholly or partly) from the debtor or another person knowingly making a false statement or a false representation, or failing or omitting to comply with a provision of the SSAct, the SS(Admin)Act or the Social Security Act 1947.
• The debt resulted (wholly or partly) from such an act, failure or omission by the debtor, but that act, failure or omission was justified in the circumstances.
• The debt resulted (wholly or partly) from such an act, failure or omission by another person, but the debtor
  • did not know about the act, failure or omission, or
  • was justified in the circumstances for not correcting the act, failure or omission.

Although the debt may not be waived where financial hardship is the only special circumstance, it may still be written off under the SSAct section 1236.

The special circumstances waiver requires discretionary decisions to be made based on the facts of individual cases.

When it is desirable to waive a debt

In Davy and Secretary, Department of Employment and Workplace Relations (2007) AATA 1114, the AAT held that:

• ‘special circumstances’ are not merely directed to the person's own circumstances. Rather they are directed to those that are 'special circumstances … that make it desirable to waive'. That necessarily requires a consideration of the person's individual circumstances but also a consideration of the general administration of the social security system.

The integrity of the social security system relies on recovery of debts. In general, if a person had the use and advantage of the money paid incorrectly to them and has the means to repay it without excessive hardship (for example, through withholdings), they should do so.

The special circumstances waiver is appropriate only if the person's particular circumstances make it unfair for that general principle to apply. The debtor’s circumstances need to distinguish their situation from that of the many other people who do have to repay their debts.

When it is more appropriate to write off a debt

In applying the special circumstances waiver, the Secretary must consider whether it is more appropriate to waive the debt than write off the debt.

A debt may only be written off in certain circumstances (6.7.3.10).

It may be more appropriate to write off the debt for a period of time if the debtor’s circumstances limiting their capacity to repay the debt are likely to be temporary and recovery of the debt would be possible and desirable in future.

If the debtor’s only special circumstances are financial hardship, the debt cannot be waived under the special circumstances waiver. In these circumstances it may be more appropriate to write off the debt for a period of time.

Waiving a debt in full or in part

The special circumstances waiver is not 'all or nothing’. The special circumstances waiver can be used to reduce part of a person’s debt (for example, by 20% or 50%, or by a fixed amount) where the Secretary considers recovery of the full debt amount would not be desirable, but some recovery is still warranted.

Where appropriate, the proportion waived can have regard to the proportion of the debt that is affected by the person’s circumstances that are considered special.

What are special circumstances

In Beadle and Director-General of Social Security (1984) 1 AATA 176, the AAT held that 'an expression such as special circumstances is by its very nature incapable of precise or exhaustive definition'. Further, the AAT held that special circumstances 'looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur'. The person’s circumstances must be considered in their entirety.

Circumstances can be considered unusual, uncommon or exceptional when taken in context or in combination with other circumstances. The impact of the circumstances on the individual should also be considered when considering whether circumstances are sufficiently special.

The decision to apply special circumstances should take into account all of the person's circumstances and would usually be based on a combination of factors. This could include factors such as family and domestic violence or addiction or dependence on drugs, alcohol or gambling. See Factors historically considered when applying the special circumstances waiver for more information below.

The circumstances being considered by the Secretary can relate to any time period. The special circumstances do not need to relate to the cause of the debt. The Secretary may decide that it is desirable to waive the debt because the person had special circumstances when the debt arose, or during the period the debt was identified, raised for recovery and repaid. The Secretary may also decide that it is desirable to waive the debt because the person is currently experiencing special circumstances.

There is nothing in SSAct section 1237AAD that limits the broad discretion available to the Secretary to determine that a person's circumstances are special enough circumstances that make it desirable to waive the debt.

Note that section 1237AAD is subject to section 1237AAE Extra rules for waiver of AoS debts.

Interaction of 'administrative error' & special circumstances

Sole administrative error by the Commonwealth, considered on its own, would not generally lead to a special circumstances waiver. Section 1237A of the SSAct is a specific waiver provision for debts attributable solely to an administrative error.

However, taken in context, an administrative error may sometimes combine with other circumstances to create a situation that is, overall, special.

The interpretation of ‘knew’ & 'knowingly' for the purposes of SSAct section 1237AAD

SSAct section 1237AAD requires the Secretary to determine whether the debt arose because the debtor, or another person, knowingly made a false statement or representation, or failed or omitted to comply with a provision of the SSAct, the SS(Admin)Act, or the Social Security Act 1947.

In such situations where the debt resulted from such an act, failure or omission by another person, the Secretary is also required to consider whether the debtor knew about that act, failure or omission. If the debtor did know about the other person’s act, failure or omission, then the Secretary is required to consider whether it was justified in the circumstances for the debtor not to correct that act, failure or omission.

Decisions regarding 'knowingly', ‘know’ and 'knew' should be based on an assessment of what the debtor or another person actually knew in the particular case.

In Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435, the AAT held that where the debtor has actual knowledge not merely constructive knowledge, that their statements or representations are false, or that they did not comply with the provisions of the various Acts, they will have knowingly committed these acts. Actual knowledge is to be ascertained by reference to the statements of the person as to their actual state of knowledge at the time and to events surrounding the false statement or the act or omission.

In Jonauskas; Secretary, Department of Families and Community Services (2001) AATA 72, Deputy President Forgie reiterated the position she had adopted in Re Callaghan that knowingly in the context of SSAct section 1237AAD 'is a deliberate choice and means actual knowledge' (at (73)). It does not encompass reckless disregard, although recklessness could be relevant in determining whether special circumstances existed.

In Nisha and Secretary, Department of Family and Community Services (2000) AATA 315 the Applicant’s child was born with disability and had ongoing health issues that required medical treatment. This caused the Applicant to experience depression. The Tribunal found that while the Applicant had the opportunity to advise of a change in their circumstances, their capacity to properly consider their situation and deal with their responsibilities was severely impaired and reduced. The Tribunal found that although the Applicant failed to meet their obligations, this was not done so knowingly, given their impaired capacity to understand and meet their obligations.

It is a civil standard of proof, whether on the balance of probabilities whether the debtor knowingly made a conscious and deliberate choice (Re Morgan; Department of Family and Community Services (1999) AATA 390).

The interpretation of 'justified in the circumstances' for the purposes of SSAct section 1237AAD

In situations where a debtor knowingly made a false statement or representation, or failed or omitted to comply with a provision of the SSAct, the SS(Admin)Act, or the Social Security Act 1947 in connection with the debt, the special circumstances waiver can only be applied if the debtor’s act, failure or omission was 'justified in the circumstances'.

In situations where another person knowingly made a false statement or representation, or failed or omitted to comply with a provision of the SSAct, the SS(Admin)Act, or the Social Security Act 1947 in connection with the debt, and the debtor knew about that act, failure or omission, the special circumstances waiver can only be applied if it was justified in the circumstances that the debtor did not correct that act, failure or omission.

In considering whether a debtor was justified in the circumstances the Secretary will be required to consider the person’s circumstances in their entirety, and make the relevant findings based upon available evidence. ‘Justified’ is interpreted as having its ordinary meaning, that is ‘acceptable or having good cause or reason’ or ‘to show a satisfactory reason or excuse for something done’.

This means, in relation to the cause of the relevant debt, for the debtor’s conduct to be justified, the Secretary must be satisfied that the person’s circumstances provide an acceptable or satisfactory reason warranting that conduct. This is a subjective test based on the circumstances of the particular case and will include considering the personal perspective of the debtor and what they considered when deciding how to act, or not act, in particular circumstances.

The debtor is not required to 'justify' how the circumstances impacted their decision-making or conduct. There is no burden on the debtor to justify their state of mind.

Whether the debtor’s conduct is justified in the circumstances where they acted knowingly is to be considered separately to whether there are special circumstances that make it desirable to waive the debt, noting:

• Consideration of whether the debtor’s conduct is justified in the circumstances involves considering the circumstances resulting in the debt.
• Consideration of whether there are special circumstances that make it desirable to waive the debt requires consideration of whether, based on any information about the debtor’s past and present circumstances that is available at the time the possible application of the waiver is being determined, there are special circumstances that make it desirable to waive the debt. The consideration of special circumstances may involve consideration of circumstances that were not present at the time the debt arose or are not relevant to the cause of the debt.

Factors historically considered when applying the special circumstances waiver

In Secretary, Department of Social Security v Paul Raymond Hulls (1991) 13 AAR 414, the Federal Court of Australia held that it is not possible to set out a complete list of the relevant factors to be taken into account in determining whether special circumstances exist. Each case must be considered on its own merits.

Factors that have historically been considered as part of broader determinations of whether special circumstances exist at the ART and Federal Court of Australia, and could be considered as part of determining whether a person’s conduct was justified in the circumstances, include, but are not limited to:

• the person’s physical and mental health
• the person’s decision-making capacity
• the person’s financial circumstances, including any debts and pending expenses
• the person’s living situation, including any experience of homelessness or housing insecurity
• the person’s addiction or dependence on drugs, alcohol or gambling
• the person’s obligations and responsibilities, including caring responsibilities
• the presence of family and domestic violence, financial abuse or coercion
• the impact of external events and factors, including emergencies and disasters
• the impact of cultural and language barriers, or the specific involvement of nominees or third parties.

Any notional entitlement the person may have had to another social security payment during the debt period (6.7.3.80) can also be considered a special circumstance, as per the Federal Court of Australia in Oberhardt v Secretary, Department of Education, Employment and Workplace Relations (2008) FCA 1923.

The Federal Court of Australia noted that

• the term 'notional entitlement' is not defined in the SSAct, although it is used in section 1237AAC. In essence, the term refers to an unclaimed benefit, a benefit which was not actually claimed by the person, but to which that person would have been entitled had they applied for it.

It further reasoned that notional entitlement should not be excluded from the range of relevant considerations in deciding whether there are special circumstances to waive a debt.

In VLYK; Secretary, Department of Social Services and (Social services second review) (2021) AATA 2774 the Tribunal found that VLYK’s debt could be waived in part due to special circumstances, stating the reasoning from Wilson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Anor (2012) AATA 15 that the likelihood that the Applicant would have received a similar benefit supports a conclusion that their circumstances were out of the ordinary.

What evidence is required of a person’s circumstances

The Secretary should make decisions on whether to apply the special circumstances waiver based on the evidence available and the circumstances of the individual case. This includes considering, where appropriate:

• the debtor’s own statements and account of events
• indicators and details on the debtor’s record, such as notes of previous contact with Centrelink, partnered status, income and assets, homelessness, mental health, or social worker involvement
• contemporaneous evidence provided by the debtor, for example bank statements, insurance claims or police or court documents (such as a family safety intervention order)
• verification of the debtor’s circumstances from other sources, for example support services, counsellors, doctors, accommodation providers or social workers
• any other evidence that could assist in applying the special circumstances waiver.

Statements made by a debtor should generally be considered a truthful account of their circumstances, unless contradictory evidence is obtained. It may be appropriate for the Secretary to request additional evidence from the debtor to verify their circumstances in some instances, for example if:

• the amount of debt being considered for possible waiver is particularly large
• there is reason for the Secretary to doubt the truthfulness of the debtor’s account (for example, the Secretary is aware of contradictory evidence about the debtor’s circumstances)
• the circumstances of the debt or debtor warrant additional verification or evidence.

Requests for additional evidence of a debtor’s circumstances should consider the administrative impost of such a request, particularly if they relate to circumstances that occurred long ago. The debtor should not be required to re-provide evidence already evident from their customer record. Where additional evidence is no longer available, but the Secretary considers the debtor’s account alone is insufficient, a Commonwealth statutory declaration observed by an approved witness outlining the circumstances in question can be considered sufficient evidence of those circumstances. Intentionally making a false statement in a statutory declaration carries a penalty of up to 4 years in prison.

Any notice of decision regarding the special circumstances waiver must include a summary of the evidence considered as part of the decision.