188.8.131.52 Waiver of Debts - Administrative Error
Centrelink must waive the right to recover so much of a debt that is solely attributable to an administrative error made by the Commonwealth if:
- the debtor received the payment or payments that gave rise to the proportion of the debt in good faith, and
- the debtor would suffer severe financial hardship if it were not waived.
Severe financial hardship
The issue of severe financial hardship should be decided on an individual basis, taking into account the recipient's circumstances. These would include:
- the make-up of the family group (e.g. single parent, number of children, etc.),
- current family income and expenses,
- available funds, and
- exceptional expenses (e.g. funeral or pharmaceutical costs).
There must be clear evidence that severe financial hardship would result (after reasonable expenses are deducted from income) if recovery of the debt were pursued. Reasonable expenditure includes, but is not limited to: rent, mortgage or other minimum loan repayments, groceries, electricity, school fees, medical costs, etc.
The rate of income support, including the family assistance a family group would be paid if they were eligible, may be used as a benchmark when comparing the family's income and expenditure. If the family's income is greater than this amount but their reported expenditure leaves a net income less than the minimum repayment amount, then it may be relevant to examine whether their expenditure is reasonable.
For the purpose of considering waiver or a write off, a person would be subject to severe financial hardship if their net fortnightly income (after reasonable expenses are deducted) over the debt repayment period would be less than the minimum fortnightly amount the person would be allowed to repay under the flexible repayment arrangements for family assistance debts.
Example: Lydia is a sole parent with a new baby and had received 14 weeks of PLP before returning to work. Lydia reported her return to work and had thought that her PLP had been stopped at the right time. Lydia was overpaid 2 weeks of PLP. Lydia has since lost her job. Lydia's PLP debt was caused solely by administrative error and was received in good faith. Lydia has appealed against the decision to recover the debt as she says that this would place her family in severe financial hardship. Lydia has provided Centrelink with information to support her request including a detailed fortnightly statement of financial circumstances listing her income and expenditure. Lydia's expenses are reasonable and include necessary costs such as rent, food, petrol, electricity, gas and school fees. She has provided supporting receipts and invoices. In addition to her regular expenses Lydia also has substantial debts due to a recent illness and has no savings or readily convertible assets.
After taking into account Lydia's regular expenses it was found that her remaining income would be less than the minimum repayment amount required over the repayment period. It is clear that Lydia could not sustain her financial responsibilities and repay the debt. Recovery would cause Lydia severe financial hardship and the debt may be waived.
Act reference: PPLAct section 195 Waiver of debts-administrative error