188.8.131.52 Treatment of debts under income management
This topic contains information on:
- treatment of Centrelink debts
- treatment of private debts, and
- treatment of rental arrears or property debts.
Treatment of Centrelink debts
The amount of a person's payment that is income managed is determined after their gross entitlement has been calculated, less any compulsory deductions (184.108.40.206). Compulsory deductions include deductions related to Centrelink overpayment recovery (e.g. withholdings).
Deductions are applied in this way, regardless of whether the Centrelink debt or withholdings started before or after the commencement of income management.
Note: Income managed funds can be used to make lump sum repayments towards Centrelink debts. This action can only be taken with the agreement of the person, and the delegate MUST still ensure that the priority needs of the person and those of their partner and dependants are met first, before an amount is repaid to the Commonwealth.
Treatment of private debts
Private debts can be paid from income managed funds where they relate to a priority need. It does not matter if the debt was incurred before the person became subject to income management.
Other debts not relating to priority needs, such as parking or other fines (220.127.116.11), would be expected to be paid out of a person's discretionary income. Alternatively, these debts may be paid from income managed funds if the delegate is satisfied that the current, and reasonably foreseeable priority needs of the person, their partner and dependants can also be met from the person's income management account.
The delegate must take action to ensure that the debt was not incurred to purchase prohibited goods/services (e.g. pre-existing credit card debts.)
Treatment of rental arrears or property debt
If a person incurs a debt for expenses related to priority needs (e.g. debt for damage to property in relation to the priority need of housing) and payment of this debt is directly related to the person obtaining or maintaining this priority need, then income managed funds may be directed to repaying such debts.