Confusion in Centrelink about removal of six-year expiry date on debts

By Stephen Easton

Wednesday January 18, 2017

A Centrelink office in Sydney on Monday, May 28, 2012. (AAP Image/April Fonti) NO ARCHIVING

Just as Australians were ringing in the new year and the public campaign against Centrelink’s massively scaled-up debt recovery program was beginning to pick up steam, a legislative change removed a time limit that meant a certain number of welfare debts used to expire.

Previously, unlike other debts to the government, notably those owed to the Australian Taxation Office, welfare debts would lapse if no action was taken to recover them in six years.

Agencies like Centrelink could fairly easily restart the six-year limit, by taking a basic action like opening the client’s record and doing a basic review, but nonetheless it resulted in some debts expiring because the agency did not have enough resources to pursue them all.

From January 1 it was removed entirely by the Budget Savings (Omnibus) Act, shortly after the government asked Centrelink to identify and recover hundreds of thousands more debts than it ever has before by significantly decreasing the amount of administrative effort spent on each one.

The various pieces of legislation amended by the act now say welfare debt recovery actions can take place “at any time” and according to the act’s explanatory memorandum:

“This will align social welfare debt recovery with the arrangements applied by other government agencies involved in the recovery of Commonwealth debts, where there is no such limitation.

” … Removing this limitation will prevent debts from ‘ageing’ out of recovery, and will improve the ability to recover old debts. Debt recovery will be able to commence at any time.”

The Mandarin has heard a significant number of relatively senior Department of Human Services staff are under the impression that the removal of the six-year limit has opened up a very large number of potential debts to recovery action that were previously off-limits.

There’s apparently a view in the agency that now there is nothing stopping the automated compliance program from going back through tax and welfare records “indefinitely” to find new debts to raise.

But an independent expert in social security law said this was not quite right; the six-year limit only ever applied to debts after they were raised. The clock started when the agency became aware of the debt (or when it reasonably should have — for example, if it was notified of an overpayment but failed to actually raise a debt for six years or more).

The legal interpretation was that Centrelink could always chase a debt from any time in the past — provided it could argue there was no reasonable way to have found out more than six years prior — but in practice it always raised more debts than it could recover, so it prioritised the biggest ones and did not go looking for new ones especially hard.

The Mandarin also understands that debts which expired after no action was taken for more than six years before the change on January 1 cannot be resurrected.

The further back Centrelink goes looking for past discrepancies between taxable income and support payments, the less chance there is that the people advised of potential debts will be able to produce payslips or other records to prove they were not overpaid.

The National Social Security Rights Network (previously the Welfare Rights Network) opposed the removal of the six-year expiry date. In a recent statement, it says a lot of people are contacting it in distress because they do not realise “the system does not necessarily require people to have documentation from many years ago” and think that “without it they cannot provide the information being sought” by Centrelink. The body recommends:

“If it continues, the system should be applied to the most recent financial years first. Many people would be able to readily check information against their recent records, reducing their distress and anxiety about the process. This would also give more time for Centrelink and other stakeholders to assess how the system is working and make a considered decision whether it is fair and reasonable to roll out for earlier years.”

In any case, DHS spokesperson Hank Jongen told The Mandarin there are no plans to check the records any further back than six years ago:

“As part of the compliance measures announced in the 2015-16 budget, 2015-16 MYEFO and in the 2016-2017 MYEFO, compliance reviews will not be undertaken prior to 2010-11 financial year.”

The Mandarin has also heard some of the controversial letters have queried people’s past welfare payments based on income they earned working for the department itself, later on in the relevant financial years — but when they asked if DHS could provide copies of their old payslips, the department’s records did not go back far enough. Jongen says this is not true as far as he knows:

“The above statement is not accurate. The Department of Human Services retains all of its payroll information in accordance with the Archives Act and is unaware of any current or former staff member who has requested information regarding their income and has not been able to receive it.”

As of the recent Mid-Year Economic and Fiscal Outlook, the government expected to save $700 million from parents’ income support, $400 million from the disability support pension, $1.5 billion from jobseeker support and $1.1 billion from the aged pension over four years, “primarily due to measures to enhance the integrity of social welfare payments, including expanding and extending data matching activities with the Australian Taxation Office”.

The debt recovery measures in the Budget Savings (Omnibus) Act were expected to improve the government’s underlying cash balance by $157.8 million in total, but the full costs and benefits of “expanding and extending data matching activities” is far from clear.

Department rebuts anonymous insiders

Jongen released a statement on Monday saying 80% of cases flagged by the automated system resulted in a debt and the other 20% were cases where “people have explained the differences” and been absolved:

“This is how the system is designed to work, in line with the legal requirements of welfare recipients to report all changes in circumstances and the department’s obligation to protect government outlays.”

But there is a third group the statement fails to acknowledge: those who reported their income to Centrelink and the ATO accurately when they received the welfare payments, but are unable to produce the records to prove it.

Jongen’s defence of the data matching system came in a response to a list of complaints relayed to the Commonwealth Ombudsman by cross-bench MP Andrew Wilkie, who wrote he was “deeply concerned” by what several current and former Centrelink employees have told him about their bosses.

The department’s tireless spokesperson dismissed the entire document as inaccurate and misleading — but Wilkie is far from the only one receiving information from worried Centrelink insiders who prefer to remain anonymous for obvious reasons. It is clear that the souped-up compliance program is causing significant concern in the agency, particularly when friends or relatives receive one of the dreaded letters.

Wilkie wanted the ombudsman to investigate claims the agency had so many distressed and “suicidal” customers on the phone that it couldn’t transfer them all to social workers, and an “error” meant some were repeatedly transferred back to regular call centre staff for several days.

Not true, according to Jongen. There has been an increase in social worker referrals but he says it’s due to domestic violence, not debts. He adds:

“Staff are transferring calls to social workers where necessary as per our standard process and we are meeting our service standards. There have been no procedural issues with social workers being available.”

Wilkie claims insiders also told him there was “little to no training” on the debt recovery program and that it was focused on sending out as many letters as possible, with staff told to process debts relating to payments they were not trained to administer, review officers told to “wave the debts through with little scrutiny” and various related managerial fudges.

Wrong again, says Jongen; everyone involved has done “additional” training and all due process is being followed. He denies that “officers are given a quota of 6-10 debt notices a day and encouraged by senior departmental staff to compete with each other for the highest quota” or encouraged to work extra overtime on the program:

“However, as part of our normal practice we do have service standard targets for dealing with debts as quickly as possible, which may include overtime. It would appear these two processes have been confused. These are long-standing arrangements that have been in place for many years. Staff are expected to meet quality and efficient service standards for all Australians.”

According to Wilkie, he heard staff who ask too many questions or look too closely at complex cases had been “managed out of debt recovery” and employees had been “penalised” for reminding customers they can apply to have debts put on hold due to financial hardship. Jongen says this is a “ludicrous” suggestion.

While the government maintains there is no major problem, other Tasmanian politicians on its own side of the aisle seem more concerned. Senator Eric Abetz conceded the volume of complaints “does indicate that the process may not have been as robust as it could have been” and gently expressed his concerns after some of his own relatives received the letters, while the state government has expressed concern and urged its federal allies to resolve the controversy around the program.

While the ombudsman had already received enough complaints to start an own-motion investigation of the program, shadow minister for human services Linda Burney announced today that the opposition will support calls for a Senate inquiry when Parliament resumes next month.

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