5 Managing debts and amounts owing to the Commonwealth

This part covers instructions to officials on the management of debts and amounts owing to the Commonwealth, and includes the following topics:

• Debt management recovery and non-recovery (write-off)
• waiver of amounts owing to the Commonwealth
• payment by instalments or deferral of the time for payment.

A debt is an amount owing to the Commonwealth that is known (or capable of being objectively determined) and is not disputed, due for payment now, and capable of being recovered in an action for debt (e.g. an official who is overpaid salary, or a person who has been overpaid a social security payment, may owe a debt to the Commonwealth).

An amount owing to the Commonwealth includes all debts owed to the Commonwealth, as well as amounts that are not yet due for payment (e.g. an invoice has been issued but payment is not due until the following month).

It is important that you can identify and distinguish between a debt and an amount owing. In relation to amounts owing to the Commonwealth, the general principle is that such amounts need to be paid in full immediately when they become due. However, in certain circumstances it may be appropriate to defer the time for payment, allow payment by instalments, waive the amount owing to the Commonwealth, or set off the amount owing to the Commonwealth in accordance with sections 63 and 64 of the PGPA Act.

The Finance Minister has delegated the power in section 63 of the PGPA Act to waive amounts owing to the Commonwealth or modify the terms and conditions on which an amount owing to the Commonwealth is to be paid (see Waiver of amounts owing to the Commonwealth).

Debt management (recovery and write-off)

This section provides instructions on the recovery and non-recovery (write-off) of debts. Accountable authorities are required to recover all debts for which they are responsible in accordance with the proper use and management of public resources (section 15 of the PGPA Act) and section 11 of the PGPA Rule, unless:

• the debt has been written off as authorised by an Act
• they consider that the debt is not legally recoverable or
• recovery is not economical to pursue.

An accountable authority may delegate to officials their authority in section 11 of the PGPA Rule to approve the non-recovery (write-off) of a debt.

A decision to write off a debt does not legally extinguish the debt. For example, if the debtor’s circumstances change in the future, the debt can be reinstated and pursued. The only way to legally extinguish a debt or other amount owing to the Commonwealth is for the Finance Minister (or delegate) to waive the amount owing under section 63 of the PGPA Act (see Waiver of amounts owing to the Commonwealth).

Instructions – officials with a delegation to pursue debt recovery

You must cease any incorrect or ongoing overpayments as soon as you are made aware of them, and determine the amount owing to the Commonwealth or Commonwealth entity.

You must pursue recovery of each debt for which your accountable authority is responsible, except debts that are:

• written off as authorised by an Act
• not legally recoverable; or
• not economical to pursue.
• Under Memorandum of Understanding, the AHRC Finance and Services Section has the day-to-day responsibility for the recovery of debts.
• In administering the OAIC’s debt recovery program, the Finance Section:
• issues invoices or debit advice notes (as appropriate) for each debtor;
• promptly pursues any debt not paid within the OAIC’s normal terms of trade conditions;
• ensures all debtors receipts are promptly brought to account against the appropriate debtor record; and
• provides for inclusion in the annual financial statements of the OAIC the amount of debts outstanding as at 30 June each year; and an estimated provision for doubtful debts as at 30 June.
• Where a debtors’ cheque is dishonoured or payment is not received within the OAIC’s normal terms of trade the Deputy Commissioner will determine the appropriate course of action to be followed.
• OAIC employees who receive overpayments of salary or allowances become debtors of the OAIC. These debts may be recovered by way of a common law right of set-off from their pay or other money owing to them. Compulsory salary deductions take precedence over voluntary deductions from an employee's pay.
• Where an employee is leaving, or has left the OAIC, the amount of any recoverable overpayments may be deducted from any final moneys due to the employee.

Instructions – all officials

You must ensure that a decision not to pursue the recovery of a debt is approved by your accountable authority or a delegate under section 11 of the PGPA Rule.

Instructions – officials with a delegation to approve non-recovery of a debt

You may approve the non-recovery of a debt where:

• the non-recovery has been authorised by an Act
• you are satisfied that the debt is not legally recoverable; or
• you consider that it is not economical to pursue recovery of the debt.

Waiver of amounts owing to the Commonwealth

A waiver is a special concession granted to an individual or other body that extinguishes a debt or other amount owing to the Commonwealth. This means that the amount owing is completely forgiven and can no longer be recovered (even if the debtor’s circumstances change in the future). Waivers are a last resort in circumstances where the recovery of the debt would be inequitable or cause ongoing financial hardship.
The Finance Minister may waive an amount owing to the Commonwealth under section 63 of the PGPA Act (subject to some additional requirements for large amounts; see section 24 of the PGPA Rule). The Finance Minister has also delegated this power to the Secretary of Finance, and to the accountable authority of the Australian Securities and Investments Commission for use in limited circumstances.

Instructions – all officials

You must not approve the waiver of an amount owing under the PGPA Act unless you are delegated the power to waive the amount owing under section 63 of the PGPA Act>.

You must ensure that all requests for waiver of a debt are referred to the Finance Minister.

Instructions – officials with a delegation to waive amounts owing

When waiving an amount owing under the PGPA Act, you must comply with the directions in the delegation from the Finance Minister or any directions in the sub-delegation from your accountable authority.

The waiver may be conditional as modified by the Finance Minister or your accountable authority.

• The AHRC Finance and Services Section is responsible for coordinating any requests to waive recovery of debts owing to the OAIC.

Payment by instalments or deferral of the time for payment

This section provides instructions on permitting payment by instalments or deferral of the time for payment. Amounts owing to the Commonwealth are generally required to be paid in full immediately when they become due. However, there may be circumstances that warrant allowing a payment to be made by instalments, or deferring the time for payment.

The Finance Minister has delegated the power in section 63 of the PGPA Act to all accountable authorities to modify the terms and conditions on which an amount owing to the Commonwealth is to be paid. Accountable authorities may sub-delegate this power to officials in their entity.

Instructions – all officials

You must refer requests to:

• allow the payment by instalments of an amount owing to the Commonwealth; or
• defer the time for payment of an amount owing to the Commonwealth

to your accountable authority or a delegate with the relevant power under section 63 of the PGPA Act.

Instructions – officials with a delegation to allow payment by instalments or defer the time for payment

When allowing payment by instalments or deferring the time for payment of an amount owing to the Commonwealth, you must comply with the directions in the delegation from the Finance Minister or any directions in the sub-delegation from your accountable authority.

Cases of hardship

When considering cases of claimed hardship, you must require that the debtor provide sufficient evidence to satisfy you that it would be unreasonable to require repayment of the amount owing other than by instalments or at a deferred date. You must also have regard to the Commonwealth’s interests not being subordinate to other creditors of the same ranking.

Instalments

When authorising payment by instalments, you must impose conditions to ensure recovery of the amount owing as soon as reasonably practicable, having regard to the debtor’s ability to pay.

Interest

When authorising payment by instalments or deferring the time for payment, you must impose interest on the amount owing at the 90-day bank-accepted bill rate (available from the Reserve Bank of Australia). However, if this would cause undue financial hardship, you may impose a lesser rate of interest, or no interest, provided you record in writing your reasons for doing so.

Information to be given to debtor

When authorising payment by instalments or deferring the time for payment, you must inform the debtor in writing of:

• the amount owing to the Commonwealth
• the date(s) when payment is due
• the interest rate (if any)
• any other matter you consider relevant
• the conditions of acceptance contained in the delegation from the Finance Minister.

You must also obtain written confirmation from the debtor that they accept all of the matters listed above.

• The repayment arrangements must be reviewed if there is an improvement in the debtor’s circumstances, or at least annually, to determine whether a higher rate of instalment should be sought.