9.4.7 AoS debts

Introduction

This section covers the following:

• AoS debts
• AoS debt recovery
• waiver of AoS debts, and
• debts resulting from incorrect payments to an assuree.

AoS debts

If an assuree receives a recoverable social security payment during the AoS period, the assurer is liable to repay the Commonwealth the amount of payment received by the assuree and an AoS debt will be raised against the assurer under SSAct section 1227. Recoverable social security payments are outlined in 9.4.1.10.

AoS debt recovery

If a security in the form of a bank guarantee was lodged as part of the AoS, any AoS debts that arise will be recovered from the security in the first instance. AoS securities are outlined in 9.4.4.

If the amount of the security is insufficient to cover the AoS debt, or no security was required for the AoS, the normal debt recovery methods set out in Part 5.3 of the SSAct apply (6.7.2).

Note: The security can only be used to recover an AoS debt. It cannot be used to recover any other debt.

AoS debt recovery action should commence as soon as practicable after the assuree begins to receive a recoverable social security payment, that is, as soon as the AoS debt arises.

In the case of:

• AoS (security lodged) - recovery from the bank guarantee in the first instance can commence as soon as the assuree is granted a recoverable payment. Once the bank guarantee amount is fully recovered, any remaining debt will be directly sought from the assurer through other debt recovery methods, and
• AoS (security not required) - recovery from the assurer can commence through other debt recovery methods as soon as the assuree is granted a recoverable payment.

Where there is more than one assurer to an AoS, each assurer is 'jointly and severally liable' for the whole of any AoS debt. That is, there is only one debt, but each assurer is liable for the whole of that debt, and the full amount of that debt may be recovered from one assurer.

Waiver of AoS debts

The usual write off and waiver provisions apply to AoS debts, with one exception. The categories of write off and waiver are outlined in 6.7.3.10 and 6.7.3.20 respectively.

The exception is that AoS debts raised against assurers under SSAct section 1227 cannot be waived under the administrative error waiver provisions contained in SSAct section 1237A. This is because a debt can only be waived under section 1237A if the debtor is the person who received the payment that gave rise to the debt and they received the payment in good faith. This is not applicable to AoS debts because the debtor for an AoS debt is the assurer, not the person who received the payment – see the AAT decision in Secretary To the Department of Social Security and Vera Kratochvil (1995) AATA 27.

SSAct section 1237AAE imposes extra rules when considering the waiver of AoS debts under:

• section 1237AAA - waiver of small debt
• section 1237AAB - waiver in relation to settlements, or
• section 1237AAD - waiver in special circumstances.

Subsection 1237AAE(3) provides that if a security was lodged in connection with an AoS, the AoS debt can only be waived under the sections listed above if it cannot otherwise be recovered from the security. This means the AoS debt amount that may be waived under these sections must be equal to or less than the difference (if any) between the debt and the amount that can be recovered from the security in order to reduce the debt.

Subsection 1237AAE(2) provides that, when considering a waiver due to special circumstances under SSAct section 1237AAD, the waiver must be considered on grounds other than one or more of the assurers claiming they were unaware of their AoS obligations. The waiver need not relate specifically to the circumstances of the assurer. This means the decision maker can also consider the circumstances of the assuree in deciding whether there are any special circumstances in a particular case. The special circumstances do, however, need to relate to the question of whether recovery is appropriate. If an assurer claims that they were unaware of the AoS obligations, this is not considered to be special circumstances.

Subsection 1237AAE(4) provides that, in the case of a joint AoS, an AoS debt may only be waived due to special circumstances under SSAct section 1237AAD if the decision maker is satisfied that the debt amount cannot be recovered from any or all of the assurers.

Subsection 1237AAE(5) provides that, where both subsections 1237AAE(3) and (4) apply, the special circumstances waiver may be applied to waive the amount of an AoS debt that is equal to or less than:

• the difference between the debt and any amounts that can be recovered from the security, and
• the amount that the decision maker is satisfied cannot be recovered from any of the assurers.

It is not necessary for a decision maker to wait for the completion of the AoS period before deciding to waive a debt due to special circumstances under SSAct section 1237AAD. A decision maker may waive any debt if they are satisfied that there are special circumstances that justify the waiver, regardless of whether the 12-month, 2-year, 4-year or 10-year AoS period has expired.

Debts resulting from incorrect payments to an assuree

Where an assuree is incorrectly paid a payment, for example, due to administrative error, failing or omitting to comply with requirements, or misrepresentation, a debt may be raised against the assuree. This debt owed by the assuree arises under SSAct section 1223. It is not an AoS debt. An AoS debt is a debt raised against an assurer under SSAct section 1227.

All the usual write off and waiver requirements apply to debts raised against an assuree, including the administrative error waiver provisions in SSAct section 1237A. The categories of write off and waiver are outlined in 6.7.3.10 and 6.7.3.20 respectively. The extra rules that apply under SSAct section 1237AAE to the waiver of an AoS debt do not apply to debts raised against an assuree.

If an assuree was legally entitled to some of the payment they received, only the amount incorrectly paid to the assuree will be raised as a debt under section 1223 and the assurer will still be liable for the remaining amount under section 1227.