CHAPTER 5 | looking at the agencies

Centrelink, established under the Commonwealth Services Delivery Agency Act 1997, is responsible for delivering a large range of payments and programs for Australian Government agencies.

These government agencies include the Department of Agriculture, Fisheries and Forestry, the Department of Education, Science and Training and the Department of Veterans' Affairs. However, the majority of complaints that the Ombudsman receives about Centrelink relate to income support payments, family payments and other programs that Centrelink administers on behalf of the Department of Family and Community Services.

Centrelink complaints account for 46% of all complaints received by the Ombudsman. During 2003–04, we received 8,084 complaints about Centrelink compared with 9,642 complaints received in the previous year, a 16% decrease (see Figure 5.4). In approximately 55% of complaints about Centrelink, we initially decided not to investigate, because in most cases the agency had not yet been given the opportunity to address the complainant's concerns before approaching our office.

In last year's annual report, we commented about advice given by Centrelink to its customers and the need for Centrelink staff to have better familiarity with the payments and programs that it delivers, including an understanding of the underlying legislative basis for this administrative activity.

Complaints received by the Ombudsman's office during 2003–04 indicate that there is still room for improvement. Further comment on this area is covered under the 'Life events' section in this chapter.

The largest category of complaints received by the Ombudsman in 2003–04 about a single issue related to debt recovery. Another issue addressed in this section relates to a consequence of practices adopted by Centrelink to assist families to minimise their family assistance debts.

'The largest category of complaints received … about a single issue related to debt recovery.'

Debts

The social security and family assistance laws set out the basis under which a person is entitled to a range of income support and family assistance payments, and the rate of such payments. These same laws also provide for the recovery of debts, specifying what is a debt and what is a permitted method of recovery. To that end, there is no doubt Centrelink has a legitimate basis to undertake debt recovery activity.

The focus of our concern is that debt recovery policies and procedures developed and implemented by Centrelink are not only authorised by those laws, but also have regard to the position or special needs of Centrelink customers and are not heavy handed.

Examples of complaints that we have received about Centrelink's debt recovery practices are set out below. We will continue to monitor these practices in the coming year and may consider further investigation. In doing so, we will take account of the steps that Centrelink itself is undertaking to implement changes in the context of the integration of the Centrelink Service Delivery Network and recommendations from the Australian National Audit Office's Audit Report on Centrelink's Debt Management.

Pressure to pay

A number of complaints highlighted a concern as to whether Centrelink's debt recovery practices have become too outcome driven without regard to the wider social purpose that Centrelink serves.

An example is a complaint from a disability support customer who claimed that a Centrelink debt recovery officer had harassed him and his daughter. The customer had received a lump sum compensation payment due to a traffic accident, while in receipt of an income support payment. As a result of receipt of the compensation payment, Centrelink raised a debt against the customer and sought to recover that debt.

Although refusing to concede that a debt existed, the customer entered into a fortnightly repayment arrangement that reduced the debt over a number of years to approximately $10,000. Centrelink subsequently determined that the customer may have had an asset that could be used to pay off the balance of the debt, and increased the rate of withholdings from the customer's disability support pension.

The customer told the Ombudsman that he felt that he had no choice but to take out a bank loan to pay a lump sum off his Centrelink debt and stop the debt recovery officer's harassment. Unfortunately, the customer then found himself in the position of paying off the bank loan (part of which was used to repay the Centrelink debt), at the same time as having to face a reduced disability support pension due to continued withholdings.

We raised the legality and appropriateness of Centrelink's actions in pressuring an individual (especially one who had a nominee) into making a lump sum payment when a withholding arrangement to repay the debt was achieving results. Discussions were continuing with Centrelink at the end of the year.

Letters of demand

Another issue that arose concerned the practice by some Centrelink officers of contacting debtors with partners, suggesting that the couple had the capacity to repay a debt based on the partner's income. For certain payments it is necessary for a recipient to provide Centrelink with details of their partner's income, which is used to assess eligibility. In at least one case the debtor received a letter from a Centrelink debt recovery section rejecting his request for waiver of his debt and suggesting that Centrelink had the power to recover the debt from the partner.

Centrelink has no power to enforce recovery of a customer's debt from their partner. For any recovery from a partner, permission must first be obtained from the partner. Centrelink undertook to examine the matter.

Getting in quick—adding judgment interest without a judgment

We investigated a complaint that involved the addition of a substantial amount of debt interest. Our inquiries revealed that Centrelink had intended to seek a debt interest judgment on the case. Centrelink debt recovery officers anticipated the amount to be awarded and proceeded to apply this amount to the debt without gaining the judgment. The customer was provided with an updated debt statement, which indicated they owed in excess of $45,000. Following our request, Centrelink removed the anticipated debt interest and apologised to the customer.

Data-matching—many years down the track

Numerous complaints were received during the year about Centrelink's data-matching activities. Some complaints related to debts raised in relation to overpayments up to six years earlier. Many of the overpayments resulted from under-declaration of earnings. However, others resulted from a genuine misconception by Centrelink customers that information they had provided to one government agency would be automatically shared with other government agencies. Some customers had debts in excess of $10,000, due to several years of understated income.

We also identified cases where the customer provided correct income information to Centrelink in the applicable year, but Centrelink had not correctly updated earnings records on its computer system. Although, as a consequence, the customers had been paid more than they should have received, Centrelink has since reconsidered the legitimacy of recovering these debts and has applied the administrative error waiver provisions of the social security law in some of these cases. We will continue to assess the impact of these errors in the coming year.

Impact of overestimating income for family tax benefit purposes

Centrelink has implemented a number of practices aimed at reducing the likelihood of families being faced with family tax benefit debts at the end of a financial year. One of these practices includes suggesting to families that they overestimate their family income so that they would get paid less throughout the year. This would effectively result in either no debt at the end of the year or top-up if it turned out the family had overestimated their income.

However, a consequence of this practice was that in overestimating their income, some people did not qualify throughout the year for low-income health care cards. As a consequence, these people failed to qualify for certain Commonwealth and State Government discounts or concessions that are available only to low-income health care card-holders. Examples include stamp duty exemption, electricity account reductions, motor vehicle registration exemptions and reduced health and pharmaceutical costs.

We argued in one such case for payment of compensation under the Compensation for Detriment caused by Defective Administration (CDDA) scheme to a customer who complied with Centrelink's instruction to overestimate their family income for family tax benefit purposes. The family had suffered a financial loss when it could not attract certain State government concessions available to new homebuyers who were holders of low-income health care cards. The only reason that the family had not qualified for the card was because of their overestimation of income. Centrelink agreed to pay compensation.

Centrelink is reviewing its information products for customers, and internal reference material for staff, to ensure that customers are not disadvantaged by estimates of their income.

Life events

Under the Life Events Service Delivery Model adopted in the late 1990s, Centrelink undertook to match customers with the most appropriate payments and benefits for each customer's circumstances. This is done through Centrelink reviewing the information obtained from a customer completing a payment claim form, or in a pre-grant interview or other contact with them.

The view taken by the Ombudsman is that the model places an onus on Centrelink to provide accurate and clear advice to customers.

During the year we identified many instances where Centrelink had been provided with the full circumstances of a person. However, the correct payments and entitlements were not suggested or discussed with the person when they applied for a Centrelink payment, often to the person's detriment.

'… the model places an onus on Centrelink to provide accurate and clear advice to customers.'

Centrelink has implemented and committed itself to the Life Events Model. When this approach does not meet customer needs, or adversely affects the customer, compensation should be, and is, available.

An example of this problem is that some age pension recipients were not provided with information about the Pension Bonus Scheme, either at their pre-grant interview or prior to receiving the age pension. This meant that they were not aware they could access a tax-free lump sum payment of up to $25,000 by remaining in the workforce past pension age.

We found that Centrelink failed to provide information about the Pension Bonus Scheme to individuals during their contact with staff about an age pension. When a subsequent customer compensation claim was lodged, it was rejected because the view was taken that there was no onus on Centrelink to invite a claim for entitlements.

We were able to persuade Centrelink to alter its decision on several customer compensation claims about the Pension Bonus Scheme; as a result compensation equivalent to the full bonus entitlement was paid.

Centrelink has since made changes to its age pension claim form, which amalgamated information about age pension and the Pension Bonus Scheme, to ensure that customers claiming assistance have all information available at the time of claim. Other information products for age pensioners now also include information on the Pension Bonus Scheme to ensure that customers are aware of their options in this respect.