Lai and Secretary, Department of Social Services (Social services second review)

The Administrative Appeals Tribunal considered the appeal of Mrs Lai against a decision by the Secretary of the Department of Social Services concerning an overpayment of family tax benefit. The dispute centred on whether the debt was irrecoverable at law or should be waived due to special circumstances or severe financial hardship.

The Tribunal was required to determine if the debt was irrecoverable under section 95(3) of the *Administration Act 1999* (Cth), or if Mrs Lai had the capacity to repay the debt under section 95(4) of the *Administration Act*. Specifically, the Tribunal needed to assess whether Mrs Lai was suffering from "severe financial hardship" which would negate her capacity to repay, and whether there were "special circumstances" warranting the waiver of all or part of the debt under section 101 of the *Administration Act*.

The Tribunal found that none of the circumstances prescribed by section 95(3) of the *Administration Act* were present. Regarding capacity to repay, the Tribunal noted that a debtor is presumed to have capacity unless recovery would result in severe financial hardship. No submissions were made to suggest Mrs Lai was suffering from such hardship, and a previous Tribunal decision in May 2017 had already determined this. The Tribunal referred to established case law defining severe financial hardship as involving extreme financial suffering, where a person's entire financial position would be materially less than their pension rate. The Tribunal also considered the Family Assistance Guide, which defines severe financial hardship in the context of fortnightly income being less than the minimum repayment amount for family assistance debts. As there was no evidence of severe financial hardship or lack of capacity to pay, the Tribunal concluded the debts should not be written off. Furthermore, insufficient evidence was presented to warrant exercising the discretion to waive the debts under section 101 of the *Administration Act*.

The Tribunal affirmed the decision under review.