Overpayment

8.87 In delivering social security payments and entitlements, Centrelink is responsible for ensuring customer payments are correct and fraud is minimised.^[100] If a person is overpaid a social security pension, allowance or benefit, even when not at fault, the amount overpaid is a debt to Centrelink^[101] and can lead to criminal prosecution.^[102]

8.88 The social security system allows for flexible arrangements in repayment of debts and, in some circumstances, debt waiver. These concepts are discussed below.

Recovery of debts

8.89 Centrelink may recover a debt by taking the following actions:

• deduction from a person’s social security payment;
• if a person is not receiving a social security payment, a repayment arrangement;
• garnisheeing of a person’s wages or bank account; or
• legal proceedings.^[103]

8.90 If a person cannot afford debt repayments, the amount of repayment can be negotiated with Centrelink.

8.91 Where Centrelink decides that a payment paid to a third party was made in error, Centrelink may attempt to recover the amount paid from the person who was entitled to the payment, and not from the third party.^[104] For example, where a young person’s Youth Allowance is paid to a parent and an overpayment occurs, Centrelink will generally seek to recover the overpayment from the young person rather from the parent into whose account the payment was made.

Submissions and consultations

8.92 The Welfare Rights Centre Inc Queensland suggested an amendment to the Social Security Act to allow for fairness in debt repayment for example, in circumstances where a person has a debt but cannot repay due to family violence. In particular, the Centre recommended that a victim of family violence with an outstanding debt could apply for a suspension of the debt repayment.^[105]

ALRC’s views

8.93 As the ALRC did not raise the issue of repayment of debt in the Social Security Issues Paper, the ALRC is seeking further information about the methods and barriers to debt repayment by victims of family violence and whether this affects his or her safety.

Waiver of debt

8.94 Section 1237AAD of the Social Security Act provides that the Secretary may exercise a discretion to waive the right to recover a social security debt where a person can demonstrate that:

• ‘special circumstances’ exist; and
• he or she or another person did not ‘knowingly’ make a false statement or ‘knowingly’ omit to comply with the Social Security Act, its predecessor, or the Social Security (Administration) Act.^[106]

8.95 The purpose of s 1237AAD has been described as

to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words … But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose.^[107]

8.96 The National Welfare Rights Network has previously suggested that s 1237AAD of the Social Security Act should be amended to make allowance for ‘situations where women have been pressured by an abusive partner to claim a social security payment as a single person or not to declare the correct amounts of their earnings’.^[108]

8.97 A Senate Legal and Constitutional Affairs References Committee Review of Government Compensation Payments, released in 2010, explored the administration and effectiveness of the debt waiver provision and concluded that ‘the recovery of debts … where debts have been caused by the duress of another person, can clearly create unfair and unjust outcomes’.^[109] The committee therefore recommended that ‘the Australian Government review waiver of debt provisions contained in social security legislation and consider amendments to that legislation where current provisions could cause unfair and unjust outcomes for welfare recipients’.^[110]

8.98 In the Welfare Rights Centre NSW’s submission to the Senate’s review, the Centre highlighted concerns around debt waiver provisions where ‘a person is in that position due to domestic violence or acting under duress, usually from an ex-partner’.^[111] The Centre suggested that an amendment be made to s 1237AAD to ‘make allowance for situations where women have been pressured by an abusive partner to claim a social security payment as a single person or not to declare the correct amounts of their earnings’.^[112]

Special circumstances

8.99 The Guide to Social Security Law states that ‘special circumstances’ are circumstances that are unusual, uncommon or exceptional—‘special enough circumstances … that make it desirable to waive’.^[113]

8.100 The Guide to Social Security Law requires consideration of the person’s individual circumstances, but also a consideration of the general administration of the social security system. A special circumstances waiver would be appropriate only if the person’s particular circumstances made it unjust for the general rule—that is, to repay the debt—to apply.^[114]

8.101 The Guide to Social Security Law states 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. However, factors to consider include the person’s physical and emotional state and decision-making capacity and financial circumstances.^[115] The Guide to Social Security Law does not expressly direct the decision maker to consider family violence in determining whether circumstances are ‘special’.

Knowledge

8.102 The discretion to waive a debt may not be used where a debt is attributable, even in part, to knowingly false statements or failure to comply with the Social Security Act by a third party. The Guide to Social Security Law states that this knowledge must be actual and not merely constructive knowledge.^[116] It does not refer to examples of family violence that may impinge on a person’s knowledge.

8.103 Case law, however, provides that it is open to infer that a person had actual knowledge of their obligations where there were opportunities for the person to gain that knowledge and where there were no obstacles to acquire the knowledge.^[117] Such obstacles that may be considered as preventing understanding of obligations may include a person’s emotional or mental state. For example, as a result of emotional trauma and concern for family safety, the person’s ability to comprehend obligations and responsibilities may be reduced.^[118]

8.104 However, in cases of family violence, false statements or failure to comply with the Social Security Act may be attributable to an abusing partner—for example, where the abusing partner insists that his or her partner does not declare true income, employment circumstances, or presence in the family home in order to receive a payment.

8.105 In Watson v Secretary, Department of Family and Community Services,^[119] Mrs Watson was subjected to verbal and physical abuse from her partner. She was assaulted repeatedly to ‘keep her in line’ and on several occasions was hospitalised with bruising and broken bones. When she attempted to leave her partner, he told her that ‘If you leave I will kill you and your children’. The marriage broke up only when Mr Watson was imprisoned for social security fraud.

8.106 Mrs Watson had been receiving social security benefits of her own. These benefits were higher than they should have been because of her husband’s undeclared income, and when Mr Watson’s fraud became known, a substantial overpayment debt was raised against her. Mrs Watson sought waiver under s 1237AAD. It was open to the Secretary to find that Mrs Watson’s own statements had not been made ‘knowingly’ because they had been made under coercion, bud he could not waive the debt because Mr Watson (‘another person’) had the requisite knowledge.

8.107 Concerns have been raised in relation to the failure of s 1237AAD to recognise the effect of what is known as the ‘battered wives syndrome’.^[120] The National Welfare Rights Network has suggested that the reference to ‘another person’ should be amended to read ‘or another person acting as an agent for the debtor’:

Such an amendment would cover the situation where the debtor was instrumental in procuring the false statement or representation or the failure or omission to comply with the relevant legislation, but would not capture a wife or partner who was acting under duress.^[121]

Submissions and consultations

8.108 In the Social Security Issues Paper, the ALRC asked whether the Social Security Act should be amended expressly to provide for waiver of debt in situations where a person is subject to duress, undue influence or economic abuse.^[122]

8.109 Stakeholders who responded to this question generally supported an amendment to s 1237AAD of the Social Security Act to provide for debts to be waived in situations where a person has been subjected to duress or financial abuse in relation to the debt.^[123] Professors Patricia Easteal and Derek Emerson-Elliot recommend that s 1237AAD of the Social Security Act should be amended either to remove the reference to ‘or another person’.^[124]

8.110 For example, the Welfare Rights Centre NSW submitted that, ‘[i]n situations where, in the context of family violence, it would be appropriate to recover a debt from a person other than the recipient, it should be possible to do so’.^[125]

ALRC’s views

8.111 The ALRC is concerned that victims of family violence may be required to repay a debt which was incurred due to duress or coercion by a family member. The ALRC does not consider that removing the words ‘or another person’ would remedy this situation. To do so may mean that circumstances where a nominee has ‘knowingly’ made a false statement or omitted to comply with the Social Security Act may mean that the debt will never be recoverable. The ALRC also notes that there may be concerns that if another person, such as a nominee, makes a false statement or omits to comply with the Act, the principal may be liable to repay the debt.

8.112 It may be more appropriate to qualify the term ‘or another person’ with the words ‘acting as an agent for the debtor’. Such an amendment to s 1237AAD should, in the ALRC’s opinion, address circumstances such as those in Watson. There may also be value in listing family violence as a ‘special circumstance’ under s 1237AAD in the Guide to Social Security Law. The ALRC is reluctant to propose an amendment to s 1237AAD itself as to do so may limit the flexibility intended to be provided by the section. However, care should be taken to ensure that such family violence is verified so as to avoid false claims of family violence in order to avoid repayment of a debt.

Criminal charges

8.113 Obtaining a financial advantage from a Commonwealth entity, such as Centrelink, where the person knows or believes that he or she is not eligible to receive that financial advantage, is a criminal offence under the Criminal Code 1995 (Cth).^[126]

8.114 Referral of cases to the Commonwealth Director of Public Prosecutions (CDPP) is a decision for Centrelink. The ALRC understands that, as part of the referral process, for cases to qualify for investigation and consideration of prosecution action they must undergo assessment and satisfy Centrelink’s National Case Selection Guidelines.^[127] Investigation outcomes can range from an administrative remedy through to referral to the CDPP for consideration of prosecution.^[128]

8.115 The exception is serious fraud cases that have been assessed by Centrelink’s Intelligence staff as a high priority and must be investigated. The ultimate decision whether or not to prosecute is made by the CDPP.

8.116 NAAJA raised concerns that criminal charges may apply where a person intentionally obtained a financial advantage from Centrelink but the reason for obtaining the financial advantage was under circumstances of family violence through duress or economic abuse.^[129]

8.117 The ALRC did not raise Centrelink’s referral process to the CDPP in the Social Security Issues Paper. However, the ALRC considers that, as a result of the proposals in Chapter 4 in relation to screening and information sharing, information about family violence should be better captured within Centrelink, which in turn, should inform the referral process to the CDPP.