18.104.22.168 Waiver for Administrative Error Debt
Recovery of a proportion of a debt must be waived if:
- the proportion of the debt was caused solely by administrative error, and
- the payments were received in good faith, and
- the debt was not raised within 6 weeks from the later of the first payment that caused the debt or within 6 weeks of the end of a relevant notification period if the debt arose because the person complied with a notification obligation.
Recovery of a proportion of a debt must also be waived if:
- the proportion of the debt was caused by the debtor or debtor's partner underestimating the value of their property, and
- the estimate was made in good faith, and
- the value of the property could not be easily determined at the time of estimation.
A proportion of a debt can also be the entire debt amount.
Act reference: SSAct section 1237A Waiver of debt arising from error
When is a debt attributable solely to administrative error?
In general, wherever a mistake has been made in administering a payment, the debt will arise 'solely to an administrative error' providing the recipient's conduct has not contributed to the debt in any way.
Examples of administrative error include mistakes in:
- calculating the amount of a payment,
- determining which social security payment/s a person is entitled to be paid, and
- correctly actioning information provided by the recipient.
The requirement that part of the debt must have arisen 'solely' from administrative error means that there must have been no other factors that caused the debt to arise or contributed to the debt arising. The part of the debt must have arisen as a result of administrative error alone.
Example: Henry receives YA and reports that he started earning income. He continues to receive YA at the full rate for 3 weeks without realising that Centrelink has made a mistake. Henry receives a notice stating that his income is zero, and that he must inform Centrelink within 14 days if this is wrong. Henry does not notify Centrelink as required. Centrelink raises a debt against Henry 9 weeks later. The amount that was overpaid between the time that he reported his income to Centrelink and receiving the letter is due solely to administrative error. However, the remaining part of the debt cannot be attributed solely to administrative error as Henry contributed to the debt by not complying with his notification obligations.
What constitutes 'good faith'?
In Falconer and SDSS (1996) 41 ALD 187, the AAT held that the crucial question in determining whether a recipient received a payment in good faith is: 'Did the recipient know that the amount had been paid contrary to the Act?'
If a recipient knows or had reason to know that they were not entitled to a payment they received, they cannot be said to have received the payment in good faith.
The decision of whether the recipient received the payment in good faith must be based on the recipient's state of mind at relevant times, based on the best evidence available. It is essential to consider all circumstances of a case, including, but not limited to:
- Information given to the recipient via letters and other literature, interviews, and phone contact. This may help to establish the recipient's reasonable expectation about their payments.
- Information provided by the recipient about their circumstances. This may help to establish their expectations about future payments and the impact of any new information they provide to Centrelink.
- The recipient's regular pattern of payment - what would they reasonably expect to receive on a regular basis? What would be an unexpected payment or amount?
- The amount of the excess payment - it might be expected that a recipient would question a large amount.
- The period of time over which the incorrect payments were made - a short period could be considered by the recipient to be administrative delay in actioning new information, while a longer period may not.
- Whether the recipient had questioned the payment and received incorrect assurances that all was in order. In such cases, there may be grounds for attributing good faith, if the recipient has a well-grounded belief that they are entitled to some payment.
It is also important to consider whether the recipient has been 'wilfully blind' in relation to the overpayment.
Example: If a recipient has been aware of an irregularity in payments that they are receiving but fails to take steps to bring the situation to Centrelink's attention.
In the case of Jazazievska v Secretary Department of Family & Community Services (2000) [FCA 00/1484, 20/10/00], the Federal Court considered that although the applicant had been overpaid family allowance because her original income estimate was rendered obsolete by the receipt of a redundancy payment, Centrelink had failed to consider the applicant's evidence that she had disclosed receipt of the redundancy payment to Centrelink, and so had erred in law. However the applicant had queried a later receipt of a duplicate payment of basic family payment at her bank but had not contacted Centrelink, and therefore had not received the payment in good faith.
In the case of Haggerty v Department of Education Training & Youth Affairs (2000) [FCA 00/1287, 8/9/00], the Federal Court held that a student had not received Austudy in good faith because his sister, who was living with him in a family home, had applied for Austudy at the same time and was rejected on the basis of the actual means test, and therefore the brother had reason to know that he was ineligible for Austudy payments.
In the case of Pledger v Secretary Department of Family & Community Services (2002) [FCA 1576, 19/12/02], the Federal Court found that the term 'good faith' did not have any special meaning in the SSAct. Justice Weinberg found that the term good faith should be given 'their ordinary and natural meaning' and that the 'values which they reflect must be the values of ordinary, decent members of the community'. This means that decision makers must have regard to what the ordinary person in the street would think is meant by good faith in deciding on the meaning to give to the expression 'received in good faith'.
When is a payment 'received'?
Whether good faith exists must be considered at the time the payment is received. The Federal Court, in Secretary, Department of Education, Employment, Training & Youth Affairs v Prince (1997) [152 ALR 127] held that a payment is received when it becomes available for the recipient's use.
A payment can be received even if a recipient is unaware that a payment has been received (e.g. deposited into their bank account).