Australian Government employees have a duty of care to the public when performing their duties. This extends to any advice given and any actions performed.
A breach of duty of care can result from negligent advice and/or a negligent action.
Compensation can only be paid if the Department or Centrelink has breached its duty to exercise reasonable care. The payment is made in accordance with regulation 9 of the Financial Management and Accountability Regulations 1997 (FMAR).
Regulation 9 of the FMAR is NOT a way around the normal limitations in the SSAct on the payment of arrears.
There are not many negligent actions that can arise from a breach of the common law duty of care and therefore have a possibility of a legal settlement, because the majority of negligent actions under the Act are decisions that are subject to a right of review.
Contributory negligence may arise if Centrelink gave negligent advice and/or acted negligently, and either the person affected by the negligence or a third party also contributed to the negligence. In such a case, a partial payment could be made to compensate for that part of the loss that resulted from Centrelink's negligence.
A lump sum payment in arrears is a payment received in one tax year that includes income that accrued in previous tax years. The lump sum is assessable in the year of receipt. However, a person may be eligible for a lump sum payment in arrears tax offset to reduce the amount of tax the person has to pay. The tax offset is designed to alleviate the problem of more tax being payable in the year in which the lump sum is received than would have been payable if the lump sum had been taxed in each of the years in which it had accrued.
The lump sum payment in arrears tax offset applies to certain payments made on or after 1 July 1986 and includes arrears in payments of certain non-exempt social security payments.
If a person seeks compensation for a loss in these circumstances, they should first be referred to the ATO for clarification of entitlement to this tax offset. It may be that after application of the tax offset, no economic loss exists.
If the tax offset does not apply, or does not relieve the person of the additional taxation liability in full, the claim should be considered in accordance with Regulation 9 of the FMAR. If it can be accepted that the taxation liability in question arose from departmental or Centrelink negligence, then the negligence claim may be settled. If no negligence occurred, the matter may still be considered under the Compensation for Detriment Caused by Defective Administration (CDDA) Scheme.
Act reference: SSAct section 23(1)-'social security benefit'
Income Tax Assessment Act 1936 Part III Division 17 Subdivision AB Lump sum payments in arrears
Financial Management and Regulations 1997, refer to Regulation 9
Policy reference: SS Guide 1.3.2 Defective Administration
Last reviewed: 1 July 2013