SOCIAL SECURITY OVERPAYMENTS AND DEBT RECOVERY: KEY DEVELOPMENTS

SOCIAL SECURITY OVERPAYMENTS AND DEBT RECOVERY: KEY DEVELOPMENTS

SOCIAL SECURITY OVERPAYMENTS AND DEBT RECOVERY: KEY DEVELOPMENTS Peter Sutherland School of Legal Practice, ANU College of Law Peter Sutherland School of Legal Practice, Australian National University Co-author, Social Security and Family Assistance Law, 3rd ed, 2013 Overview of This Presentation 1. Context Legislative History The Importance of Language DHS Compliance Activities

2. Chapter 5 Overpayments and Debt Recovery Chapter 5 Comprises a Code Part 5.1 - Effect of Chapter Part 5.2 Amounts Recoverable under this Act Part 5.3 Methods of Recover Part 5.4 Non-Recovery of Debts Part 5.5 - Departure Prohibition Orders 3. Part 6, Social Security (Administration) Act - Offences Reparation Orders and Recovery of Debts CONTEXT LEGISLATIVE HISTORY Social Security Act 1947 Social Security Act 1991 Social Security Law and Family Assistance Law

Developments in Chapter 5 of the 1991 Act: 1991 2017 THE IMPORTANCE OF LANGUAGE Language DHS Compliance Activities Fraud THE IMPORTANCE OF LANGUAGE overpayment An overpayment occurs where a customer receives an amount of payment higher than that authorised by the legislation. This may occur though official error, customer error, timing issues, omission or deception. debt

A social security or family assistance debt arises where the legislation provides that a customer owes a debt to the Commonwealth because of receipt of an overpayment, imposition of penalty interest, recovery of an advance or other reason. Not all overpayments result in a debt, particularly under the former 1947 Act and the adjustment provisions of the family assistance law, and not all debts are recoverable. error Overpayments may occur because of error by Centrelink (administrative error), by a customer, or a combination of causes. This is a general term used by DHS to describe its processes for prevention and identification of overpayments. This refers to failure to comply with a statutory obligation, usually (but not necessarily) with some connotation of knowing or reckless conduct. Serious non-compliance is used by DHS as a general description of fraudulent or

associated behaviour (see, for example, Annual Report 2015-16, p119). This is an activity which is an offence under the social security law, the family assistance law or criminal legislation such as the Criminal Code and the Crimes Act 1914. An offence may be committed under Part 6 of the Social Security (Administration) Act 1999 if the relevant conduct is false, misleading or reckless. compliance activities non-compliance serious noncompliance fraud DHS COMPLIANCE ACTIVITIES Interventions Reductions in payments Fortnightly savings in future

Prevented outlays Debts raised Total debt value Number of debts raised Amount raised 2013-14 2014-15 2015-16 % change 869,082

77,272 $19.2 million $51.8 million 101,351 $283.6 million 923,462 52,100 $18.2 million $61.4 million 126,134 $362.1 million 987,895 69,921 $21.7 million

$63.7 million 210,009* $694.6 million* +7.0 +34.2 +19.2 +3.7 +66.5 +91.8 2013-14 2,230,894 $2.2 billion 2014-15

2,350,131 $2.5 billion 2015-16 2,439,431 $2.8 billion FRAUD Professor Grainne McKeever (2012): In the UK levels of error both claimant and official error outstrip levels of fraud. The National Audit Office notes that in 2010-11, 1.2 billion was estimated by the Department for Work and Pensions to be lost to fraud, 1.2 billion to customer error and 800 million to official error, out of a total of 153.6 billion spent on benefits. (NAO 2011) In Australia levels of non-compliance the combined figure for error and fraud is $536 million (out of an $87 billion benefits bill), of which

$113.4 million is customer debts identified through fraud investigations (ANAO 2010: para 7). CHAPTER 5 - OVERPAYMENTS AND DEBT RECOVERY Chapter 5 Comprises a Code Part 5.1 Effect of Chapter Part 5.2 Amounts Recoverable under this Act Data-Matching and Robodebts Part 5.3 Methods of Recovery Deductions, Legal Proceedings and Garnishee Effect of Bankruptcy on Recovery of a Debt Part 5.4 Non-Recovery of Debts Legislative History Write Off and Waiver Write Off and Waiver

Part 5.5 Departure Prohibition Orders (Part inserted 1/1/17) Chapter 5 Comprises a Code Walker v SDSS [1995] FCAFC 130; 56 FCR 354 Per Drummond J Chapter 5, however, does in my opinion reveal an intention to state, in an exclusive way, how the Commonwealth can recover certain kinds of overpaid benefits. Chapter 5 commences with the statement in s 1222 of its intended operation, which included the identification of those social security and other payments which are recoverable by the Commonwealth, and lists the procedures to be followed by the Commonwealth in recovering each class of payment. The Chapter then defines these recovery procedures and makes provision for recovery in two other ways (viz., by instalments and by consent

deductions). It concludes with provisions empowering the Secretary to forego the Commonwealths entitlement to recovery of such payments. In my opinion, the opening words of s 1222(1) and the structure of Chapter 5 show that it is a code which prescribes the exclusive methods whereby recovery can be lawfully effected of those social security and other benefits listed in s 1222(1). Part 5.1 Effect of Chapter Sample item in s 1222 Section 1222 1 1135 deductions 1231, 1234A (pension loan debt) legal proceedings

garnishee notice 1233 repayment by instalments 1234 1232 CHAPTER 5 - OVERPAYMENTS AND DEBT RECOVERY Part 5.2 Amounts Recoverable under this Act Data-Matching Robodebts Part 5.3 Methods of Recovery Deductions, Legal Proceedings and Garnishee Effect of Bankruptcy on Recovery of a Debt Part 5.4 Non-Recovery of Debts

Legislative History Write Off and Waiver Write Off and Waiver Part 5.5 Departure Prohibition Orders (Part inserted 1/1/17) Section 1222A Debts due to the Commonwealth If an amount has been paid by way of social security payment, or by way of fares allowance under the Social Security (Fares Allowance) Rules 1998, the amount is a debt due to the Commonwealth if, and only if: (a) a provision of this Act, the 1947 Act, the Social Security (Fares Allowance) Rules 1998 or the Datamatching Program (Assistance and Tax) Act 1990 expressly provided that it was or expressly provides that it is, as the case may be; or; or

(b) the amount: (i) should not have been paid; and (ii) was paid before 1 January 1991; and (iii) was not an amount to which subsection 245B(2) of the 1947 Act applied. Section 1223 Debts arising from lack of qualification, overpayment etc. (1) Subject to this section, if: (a) a social security payment is made; and (b) a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit; the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to

arise when the person obtains the benefit of the payment. (1AA) Part 5.2 - Amounts Recoverable under this Act Other debt raising section examples s 1223AA Debts arising from prepayments and certain other payments; s 1223AB Debts arising from AAT stay orders; s 1223ABA Debts arising in respect of one-off payment to carers; s 1224C Data-matching Program (Assistance and Tax) Acts debts; s 1227 Assurance of support debts; s 1228 Overpayments arising under other Acts and schemes: This provision provides for debts under the VEA, the Family Assistance Act, payments under various educational schemes and compensation paid under the Military Rehabilitation and Compensation Act 2004, to be recoverable by deduction under the 1991 Act.

Data Matching DHS Annual Report 2015-16 In 2016-17 the department will undertake an enhanced approach to address compliance risks covered by the Data-matching Program. The new approach will replace the activity governed by the Data matching Program (Assistance and Tax) Act 1990 and bring the activity in line with the departments other data matching activity and the OAICs Guidelines on Data Matching in Australian Government Administration (voluntary data matching guidelines). Programme cycles conducted under the Data-matching Program will be gradually phased out and cease during 2016-17. Robodebts Commonwealth Ombudsman, Centrelinks automated debt raising and recovery system, April 2017. The Senate, Community Affairs References Committee, Design, scope,

cost-benefit analysis, contracts awarded and implementation associated with the Better Management of the Social Welfare System initiative, June 2017. Hanks QC, Peter, Administrative Law and Welfare Rights: A 40-Year Story From Green v Daniels to Robot Debt Recovery, (2017) 89 AIAL Forum 1. Office of the Australian Information Commissioner, Guidelines on Data Matching in Australian Government Administration, 2014. Part 5.3 - Methods of Recovery The primary means of recovery are: s 1231 Deductions from debtors pension, benefit or allowance; s 1232 Legal proceedings; s 1233 Garnishee notice; s 1234 Arrangement for payment of debt (repayments by

instalments). The Secretary can also recover funds from a bank where a payment has been made to the wrong person or after a recipients death (s1234) and, with consent, by deductions from the social security payment of a person who is not the debtor (s1234A). Part 5.4 Non-Recovery of Debts The sections in Part 5.4 are: s 1235 Meaning of debt (debt recoverable under Part 5.2, the 1947 Act, an international social security agreement and the Fares Allowance Rules); s 1236 Secretary may write off debt; s 1237 Power to waive Commonwealths right to recover debt; s 1237A Waiver of debt arising from error; s 1237AA waiver of debt relating to an offence; s 1237AAA Waiver of small debt; s 1237AAB Waiver in relation to settlements;

s 1237AAC Waiver where debtor or debtors partner would have been entitled to an allowance (applies only to an entitlement of family payment, family allowance, parenting allowance and parenting payment); s 1237AAD Waiver in special circumstances; s 1237AAE Extra rules for waiver of assurance of support debts; s 1237AB Secretary may waive debts of a particular class. Section 1237AAD Administrative Error 1237A Waiver of debt arising from error (1) Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt. Note: Subsection (1) does not allow waiver of a part of a debt that was caused

partly by administrative error and partly by one or more other factors (such as error by the debtor). Section 1237A(1A) provides that subsection (1) only applies if: (a) the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or (b) if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period; whichever is the later. Section 1237AAD Special Circumstances 1237AAD Waiver in special circumstances The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

(a) the debt did not result wholly or partly from the debtor or another person knowingly: (i) making a false statement or a false representation; or (ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and (b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and (c) it is more appropriate to waive than to write off the debt or part of the debt. Note 1: Section 1236 allows the Secretary to write off a debt on behalf of the Commonwealth. Note 2: This section has effect subject to section 1237AAE in relation to an assurance of support debt. Part 5.5 - Departure Prohibition Orders Part 5.5 has seven Divisions:

Div 1. Secretary may make departure prohibition orders (s 1240); Div 2. Departure from Australia of debtors prohibited (s 1241); Div 3. Other rules for departure prohibition orders (ss 1242 - 1245); Div 4. Departure authorisation certificates (ss 1246 1251); Div 5. Appeals and review in relation to departure prohibition orders and departure authorisation certificates (s 1252 1255); Div 6. Enforcement (ss 1256 s1258); Div 7. Interpretation (ss 1259 - 1260). OFFENCES Part 6, Social Security (Administration) Act 2000 Offences s 212 False statement in connection with claim or hardship request s 213 False statement to deceive or affect rates s 214 False statement or document s 215 Obtaining payment that is not payable s 216 Payment obtained through fraud etc.

Crimes Act 1914 former sections 29B, 29C, 29D s 29B False representation s 29C Statements in applications for grant of money etc. s 29D Fraud Criminal Code (Criminal Code Act 1995) Part 7.3 Fraudulent conduct Part 7.4 False or misleading statements Questions? Comments

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