Receiving a letter from Centrelink stating that you owe them money can be highly stressful. Centrelink debts (overpayments) are common, but you have rights and options for managing, reducing, or even cancelling the debt.
Why Do Centrelink Debts Happen?
Debts usually occur when Centrelink pays you more than you were entitled to receive. Common causes include:
- Under-reporting income: You or your partner earned more from work than you reported to Centrelink.
- Changes in circumstances: You moved in with a partner, your rent decreased, or your child left school, and you did not notify Centrelink within the required 14 days.
- Family Tax Benefit balancing: At tax time, Centrelink compares your estimated income with your actual taxable income. If you earned more than estimated, you may have an FTB debt.
- Centrelink errors: Sometimes, you do everything right, but Centrelink processes the information incorrectly.
What to Do When You Get a Debt Notice
1. Do not ignore it
If you ignore a debt notice, Centrelink can take aggressive recovery action. They can garnish a percentage of your current Centrelink payments, intercept your tax refund from the ATO, or refer the debt to an external collection agency.
2. Check if the debt is accurate
Before you agree to pay, ask yourself: Is this debt correct? Request a detailed breakdown of how the debt was calculated. Following the Robodebt Royal Commission, Centrelink cannot raise a debt based solely on ATO income averaging; they must have specific proof of your fortnightly earnings.
3. Appeal the debt if it is wrong
If you believe the debt is incorrect, or if the debt was caused entirely by a Centrelink administrative error (and you could not have reasonably known you were being overpaid), you should request a formal review by an Authorised Review Officer (ARO). While the debt is under review, you do not have to make repayments.
How to Repay a Centrelink Debt
If you agree that you owe the money, you need to arrange repayment. You do not have to pay it all at once.
If you are currently receiving Centrelink:
Centrelink will automatically deduct a standard percentage (usually 15%) from your fortnightly payment to repay the debt. If this leaves you in severe financial hardship, you can call Centrelink and negotiate a lower deduction rate (e.g., $15 or $20 per fortnight).
If you are no longer on Centrelink:
You must set up a payment arrangement using BPAY, Post Billpay, or direct debit. You can negotiate a manageable monthly amount based on your current budget.
Can a Debt Be Waived?
Under section 1,237 of the Social Security Act, Centrelink has the power to waive (cancel) a debt entirely in "special circumstances." This is rare, but it can happen if:
- The debt was caused solely by Centrelink's error.
- You are in extreme, ongoing financial hardship.
- Recovering the debt would cause severe psychological distress or harm.
To request a waiver, you usually need to go through the ARO appeal process.