Overpayment

9.53 In delivering social security payments and entitlements, Centrelink is responsible for ensuring customer payments are correct and fraud is minimised.^[69] 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^[70] and can lead to criminal prosecution.^[71]

9.54 The social security system allows for flexible arrangements in repayment of debts and, in some circumstances, debt waiver. Discretion to waive a debt may be used where a person can demonstrate that ‘special circumstances’ exist; and that 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.^[72]

9.55 Concerns were raised by stakeholders that this provision did not enable Centrelink to waive a debt of a person who had been coerced through family violence into misrepresenting their income or couple status in order to receive a higher rate of payment. This is because the person using family violence holds the requisite knowledge. The ALRC therefore recommends an amendment to s 1237AAD of the Social Security Act to ensure that such circumstances do not prevent a person’s debt being waived. The ALRC also recommends that the Guide to Social Security Law include examples of what does not constitute ‘knowledge’ such as family violence through economic abuse or duress.

9.56 In addition, to ensure that family violence is specifically considered in debt waiver, the ALRC recommends that family violence be listed as a ‘special circumstance’ under s 1237AAD in the Guide to Social Security Law.

Recovery of debts

9.57 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 including payment by instalments;
• garnisheeing of a person’s wages or bank account; or
• legal proceedings.^[73]

9.58 Some provision is already made for arrangements for repayment of debt under s 1234 of the Social Security Act which enables a debtor to enter into a repayment arrangement by instalment. Temporary write off is also available under s 1236(1A)(b) of the Social Security Act on the ground that a person has no capacity to pay. Unlike waiver, write-off does not extinguish the debt.^[74]

9.59 A debtor is taken to have capacity to repay unless recovery would result in the debtor being in severe financial hardship which is assessed on the debtor’s individual circumstances.^[75]

9.60 The WRC Inc (Qld) raised a concern where a person has a debt, but is unable to repay it due to family violence. The Centre suggested that a debtor in such circumstances should be able to suspend the debt repayment for a period of time on the grounds of family violence. This would enable a person to leave an abusive relationship and seek advice.^[76]

9.61 Other stakeholders agreed that flexible arrangements for repayment of a social security debt should be made available to victims of family violence.^[77] Suggestions included suspending payment of debt for a specified period of time;^[78] full or partial waiver;^[79] or reduction of instalment payments.^[80]

9.62 The NWRN recommended that the Guide to Social Security Law should be amended to provide ‘that if a person is in financial hardship or requires all available funds to respond to family violence then they should be considered to have no capacity to pay’. Alternatively the NWRN recommended a specific provision providing for temporary write off whilst a person is experiencing family violence.^[81]

9.63 The ALRC considers that the current provisions for debt repayment and write-off in the Social Security Act are flexible enough to encompass circumstances of family violence. The ALRC recommends, however, that DHS should provide customers with information about debt repayment methods and write-off, in accordance with Recommendation 4–2. The ALRC also recommends that information about debt waiver in special circumstances be provided to victims of family violence. Such early provision of information will enable victims of family violence to access advice early to claim waiver on the basis of duress or coercion.

Waiver of debt

9.64 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.^[82]

Family violence as a ‘special circumstance’

9.65 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’.^[83] 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.^[84]

9.66 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, decision-making capacity and financial circumstances.^[85] The Guide to Social Security Law does not expressly direct the decision maker to consider family violence in determining whether circumstances are ‘special’.

9.67 Stakeholders agreed that the Guide to Social Security Law should be amended expressly to refer to family violence as a ‘special circumstance’ for the purposes of s 1237AAD of the Social Security Act.^[86]In particular, National Legal Aid considered that such an amendment may address the concern about circumstances where a person has been pressured by a violent partner to claim payments as a single person or not to declare income.^[87] Therefore, to ensure that family violence is specifically considered in debt waiver, the ALRC recommends that family violence be listed as a ‘special circumstance’ under s 1237AAD in the Guide to Social Security Law.

‘Knowingly’ make false statements

9.68 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’^[88]—that victims of family violence may be required to repay a debt which was incurred due to duress or coercion by a family member. Stakeholders 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.^[89] The question is what is the best way to ensure that such a scenario is covered by the waiver provision, without creating unintended consequences.

9.69 In the Family Violence—Commonwealth Laws, ALRC Discussion Paper 76 (2011) (Discussion Paper), the ALRC proposed that s 1237AAD should be amended to provide that the Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that ‘the debt did not result wholly or partly from the debtor or another person acting as an agent for the debtor’.^[90] Most stakeholders agreed with this proposal,^[91] however, some raised concerns. The NRWN and National Legal Aid also raised concerns that the proposal would not cover circumstances where a partner or family member was acting under duress.^[92]

9.70 The AASW (Qld) and WRC Inc (Qld) raised concerns about victims of family violence who ‘knowingly’ misinformed Centrelink due to coercion from a violent partner. They therefore recommended ‘knowingly’ be removed from the section.^[93] The AASW (Qld) and WRC Inc (Qld) considered further that the Guide to Social Security Law should contain guidelines as to what ‘desirable’ means.^[94]

9.71 The Guide to Social Security Law states that knowledge must be actual and not merely constructive knowledge.^[95] It does not refer to examples of family violence that may impinge on a person’s knowledge. 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.^[96] 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.^[97]

9.72 The ALRC considers that it would be beneficial, for clarity, to include examples in the Guide to Social Security Law of what does not constitute ‘knowledge’ such as family violence through economic abuse or duress.

9.73 On the other hand, Professors Easteal and Emerson-Elliot argued that the words ‘or another person’ should be removed from s 1237AAD to cover circumstances such as those in the case of Watson v Secretary, Department of Family and Community Services.^[98] In Watson, 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.

9.74 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, but he could not waive the debt because Mr Watson (‘another person’) had the requisite knowledge. National Legal Aid provided similar case studies.^[99]

9.75 The ALRC does not consider that removing the words ‘or another person’ would remedy this situation. To do so might mean that where a nominee has ‘knowingly’ made a false statement or omitted to comply with the Social Security Act the debt would not be recoverable. There may also 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.

9.76 The ALRC therefore considers it to be more appropriate to qualify the term ‘or another person’ with the words ‘acting as an agent for the debtor’. Adding the words ‘acting as an agent for the debtor’ would cover the circumstances raised in Watson, as Mr Watson was not acting as an agent for Mrs Watson. In Watson it was found that Mrs Watson did not have the necessary mens rea due to duress, however, Mr Watson did. The ALRC therefore considers that this current interpretation of ‘knowingly’ would cover situations of duress.

9.77 The ALRC considers that these recommendations should ensure that circumstances of duress and coercion by a person using family violence do not lead to a debt repayment. The ALRC is reluctant to propose a broader amendment to s 1237AAD itself as to do so may limit the flexibility intended to be provided by the section 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.^[100]

9.78 The ALRC also considers that care should be taken to ensure that family violence is verified to avoid false claims of family violence made to avoid repayment of a debt.

9.79 Section 101 of A New Tax System (Family Assistance) Administration Act 1999 mirrors s 1237AAD of the Social Security Act. The ALRC is of the view that if s 1237AD is amended, as recommended, the Australian Government should consider a mirror amendment to s 101 of A New Tax System (Family Assistance) Administration Act.^[101]