Editors --- "Age pension debt: whether debt should be waived due to administrative error; whether payments received in 'good faith'" [2014] SocSecRpr 7; (2014) 16(1) Social Security Reporter, Article 7

• SAKOUTIS and SECRETARY to the DSS
• Background
• Legislation
• Evidence and discussion
• Decision

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Age pension debt: whether debt should be waived due to administrative error; whether payments received in 'good faith'

SAKOUTIS and SECRETARY to the DSS

(2013/885)

Decided: 13th December 2013 by D. Letcher

Background

Sakoutis was born in Greece and had limited schooling while young. He migrated to Australia and worked mainly in labouring jobs and had no further formal education. When approaching 65 he was unemployed and on newstart allowance. His wife was working at a nursing home and he was declaring her earnings to Centrelink on a fortnightly basis.

On 22 September 2006, when Sakoutis turned 65, Centrelink transferred him to age pension. Sakoutis completed and submitted a ‘Transfer to age pension- Income and Asset Review’ form. On that review form he correctly declared his wife’s annual earnings as $30,000. The Centrelink officer performing the transfer from newstart allowance to age pension made an error and coded his wife’s annual earnings as ‘$0’. His wife’s earnings were therefore not taken into account to determine his rate of age pension and he was paid at the maximum rate.

Centrelink wrote to Sakoutis on 6 and 20 September 2006. Both letters contained the phrase ‘Combined Annual Income= $5.40’. Centrelink sent further letters on 20 April 2007 and 17 April 2008.

Sakoutis continued to receive the maximum rate of age pension until 6 August 2009, when Centrelink informed him that ‘data-matching’ with the Australian Tax Office (ATO) indicated that its records did not match the ATO’s records of his wife’s income. On 8 June 2010 Sakoutis was advised in writing that he had been overpaid age pension for the period 22 September 2006 to 6 August 2009. The overpayment amounted to $14,181.26. Sakoutis sought a review of this decision. The SSAT affirmed Centrelink’s decision to raise and recover the entire debt.

Legislation

Under s.1223 of the Social Security Act 1991 (the Act) overpayments are deemed to be debts due to the Commonwealth.

Section 1237A allows waiver of a debt in the following circumstances. That section relevantly states:

1237A Waiver of debt arising from error Administrative 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).

Evidence and discussion

Sakoutis gave evidence that when he received the 6 and 20 September 2006 letters he noticed the reference to ‘Combined Annual Income- $5.40’. He stated that he thought that the $5.40 could possibly refer to bank interest, but his bank told him this was not the case. He explained he then thought no more of it. Sakoutis also gave evidence that Centrelink had not contacted him again in relation to his income, but conceded that there may have been letters sent to him that he did not recall.

Sakoutis gave evidence that he understood that his wife’s income would have some effect on his pension, but that he thought that the rules for age pension were different to the rules for newstart allowance.

Centrelink produced ‘archive copies’ of the letters sent to Sakoutis on 6 and 20 September 2006, 20 April 2007 and 17 April 2008. The Tribunal described these ‘archive copies’:

These “archive copies” were taken from computer records and it was fairly said were not in the same format as the letters actually sent. Indeed, the archive letters were almost impossible for me to decipher although the figures $5.40 and $6.30 could be discerned in a maelstrom of symbols and punctuation marks. [para.10]

Based on the material before it, the Tribunal concluded that the letters dated 20 September 2006 and 20 April 2007 did not state clearly that if his partner earns wages, Sakoutis must inform of any changes, or that if he did so, then the amount of age pension he received might be reduced. In relation to the figures $5.40 (and later $6.30) noted as ‘income’ on his Centrelink letters, the Tribunal accepted that the figures bore no relationship to the reality of Mr and Mrs Sakoutis’ income. The Tribunal accepted that Sakoutis was puzzled by the amount, but believed it to be an ‘irrelevant mistake’ [para 16]. As a result of this the Tribunal accepted that Sakoutis commenced receiving age pension in good faith.

The Tribunal further found that the payment of the maximum rate of age pension to Sakoutis from 20 September 2006 arose solely from Centrelink’s administrative error and not through any fault of Sakoutis. The Tribunal noted:

Taking into account Mr Sakoutis’ limited education, limited ability to read complex English and his age I believe it is unreasonable to expect him to have been alerted to the fact that the information he provided to Centrelink both in the Transfer form and personally the day before his Age Pension commenced was not processed by the Age Pension clerk because of a mistake. The Age Pension is provided to many people with limited education, lim-ited English and necessarily of advancing years, Centrelink letters should be clear and simple. These were not. The respondent’s Statement of Facts and Contentions... asserts that Mr Sakoutis “contributed to the debt” by not responding to the September 2006 Centrelink correspondence stating a com-bined annual income of $5.40. I disagree. That figure is so small that it is obviously nothing to do with any likely actual com-bined annual income... [Reasons, para.18]

The Tribunal then examined the letter dated 20 April 2007. This letter listed the things Sakoutis had to tell Centrelink about. The list included:

If your income changes..... that is if:

- Your combined income, not including financial investments or maintenance increases

- You or your partner start work or go back to work

- You or your partner start any form of profession, trade business of self-employment.

The Tribunal found that the word ‘combined’ in this sentence did not clearly set out that it referred to the combined income of Sakoutis and his wife. It could have referred to combined sources of personal income instead. The remaining requirements were plainly not applicable to Sakoutis, as he and his wife did not start work, return to work or start a profession or business during that time. As a result the Tribunal found that Sakoutis did not contribute to the debt as a result of not complying with any obligation set out in the April 2007 letter.

The Tribunal distinguished these letters from the letter dated 17 April 2008. The Tribunal found that the 2008 letter was in a very different form to the previous letters and clearly stated that Sakoutis was to inform Centrelink if his partner’s income changed, including if it ‘goes up or down’. The letter also clearly explained that changes to income would affect his rate of pension, possibly resulting in a debt.

The Tribunal referred to evidence given by Sakoutis that he understood that his wife’s wages would affect his rate of pension, and that her wages did indeed change, even if only by $55 per fortnight. The Tribunal also took into account the fact the much clearer statements in the 18 April 2008 letter in relation to Sakoutis’ obligations to report changes to his partner’s income. The Tribunal found that after the receipt of the April 2008 letter the debt ceased to be attributed solely to administrative error made by the Commonwealth within the meaning of s.1237A. However, up until the 17 April 2008 letter Sakoutis had received all payments in good faith and the debt was found to be solely attributed to the Commonwealth’s administrative errors.

The Tribunal was not satisfied that there were other reasons to waive recovery of the remaining portion of the debt.

Decision

The Tribunal set aside the decision under review and substituted for it the decision that:

1. The proportion of the claimed debt referable to the period 18 April 2008 to 6 August 2009 was a debt due to the Commonwealth; and

2. Recovery of the proportion of the claimed debt relating to the period 22 September 2006 to 17 April 2008 was waived pursuant to s.1237A(1) of the Act.

[D.A.]