6.7.3.40 Waiver of debt on the basis of special circumstances

Summary

All or part of a debt may be waived where circumstances make debt recovery inequitable, if:

• the debt did not result from the debtor or another person knowingly making a false statement or representation, or not complying with a provision of the SSAct, the SS(Admin)Act or the Social Security Act 1947
• special circumstances exist, other than financial hardship alone, that make it desirable to waiver the debt, and
• waiver is more appropriate than write off.

Although the debt may not be WAIVED where financial hardship is the only special circumstance, it may be WRITTEN OFF under SSAct section 1236.

What constitutes 'special circumstances'

In Beadle and Director-General of Social Security (1984) 1 AAR 362 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 circumstances must be considered in their entirety.

In Secretary, Department of Social Security v Paul Raymond Hulls (1991) 13 AAR 414, the Federal Court 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.

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. The Federal Court in Oberhardt v Secretary, Department of Education, Employment and Workplace Relations (2008) FCA 1923 held that notional entitlement, where debtor or debtor's partner would have been entitled to an allowance (6.7.3.80), should be included in considering whether special circumstances exist under SSAct section 1237AAD.

Other factors to consider when determining if special circumstances exist would include, but are not limited to, the physical and emotional state of the person together with their decision-making capacity and financial circumstances. This includes the consideration of external factors and events on the person, such as family and domestic violence or natural disasters.

There is nothing in section 1237AAD that limits the broad discretion available to the Secretary under this section of the SSAct to determine that a person's circumstances are special 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

Administrative error by the Commonwealth would not generally lead to a special circumstances waiver. The SSAct contains 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.

When it is desirable to waive recovery

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 enough 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 overpayments. In general, if a person has 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. In such a case, special circumstances waiver would be appropriate only if the person's particular circumstances made it unjust for the general rule to apply. Their circumstances would need to distinguish their situation from that of the many other people who do have to repay their debts.

The interpretation of 'knowingly' for the purposes of SSAct section 1237AAD

SSAct section 1237AAD provides that in order for a debt to be waived in special circumstances, the debtor or another person must not knowingly have:

• 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.

This means that if the debtor or another person intentionally committed these acts to any degree, the debt will not be able to be waived on the basis of special circumstances.

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 his or her 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.

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).

If the debtor behaved in a recklessly indifferent manner, they may also be considered to have acted knowingly in respect of their conduct or representations.