‘Till debt do us part

Do Centrelink debts die with you? Short answer–no.

Here’s a recent example from a decision of the Administrative Appeals Tribunal in August 2020:

• Centrelink pursued a debt of over $90,000.00 from the estate of a deceased age pensioner.
• The pensioner’s three children were her enduring power of attorney.
• Mum owned her own home and, after she moved into aged care, she retained ownership of it.
• The children failed to realise that the home was an exempt asset from the assets and incomes test for only two years after mum moved into aged care
• The two years expired in 2014 but the children did not advise Centrelink of the significant change in circumstances, namely that the home was still owned by mum resulting in the home now being an assessable asset.
• The home was worth some $1.4million.
• As the result of a data matching exercise with the Australian Tax Office, the oversight was not discovered until 2018.
• Mind you, Centrelink’s system, contrary to what it was designed to do, failed to pick up the expiry of the two year period at the time and didn’t until some 4 years later.

The precise debt that Centrelink now pursued against mum’s estate was $90,338.29!

The children argued various things including that Centrelink should waive all, or some, of the debt in light of the fact that they made an innocent mistake and were never seeking to defraud the system or to seek to get away with it. Alternatively, they asserted it was Centrelink’s systems failure that should take the fall.

The Tribunal rejected their arguments and confirmed the estate must pay the money and that it should not be waived or reduced.

The lessons are:

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1. You or your Enduring Power of Attorney’s failures, no matter how innocent, can come back to haunt you, or your estate, when Centrelink is involved;
2. Enduring Powers of Attorney need to understand that they effectively take on the obligation of their parent to comply with Centrelink requirements and need to be familiar and aware of them; and
3. Getting advice on pension rules and requirements is vital – don’t just rely on google.

In an ominous statement as well, the Tribunal said that it is, “General knowledge that the age pension is subject to an assets and an income test may reasonably be attributed to members of the community.”

This was a $90,000.00 lesson that ignorance, as usual, is no excuse.