Commonwealth Consolidated Acts Commonwealth Consolidated ActsSettlement of civil action
(1) If the Commonwealth has agreed to settle a civil action against a debtor for recovery of a debt for less than the full amount of the debt, the Secretary must waive the right to recover the difference between the debt and the amount that is the subject of the settlement.
Settlement of proceedings before the ART
(2) If the Secretary has agreed to settle proceedings before the ART relating to recovery of a debt on the basis that the debtor will pay less than the full amount of the debt, the Secretary must waive the right to recover the difference between the debt and the amount that is the subject of the settlement.
Waiver where at least 80% of debt recovered and debtor cannot pay more
(3) If:
(a) the Commonwealth has recovered at least 80% of the original value of a debt from a debtor; and
(b) the Commonwealth and the debtor agree that the recovery is in full satisfaction of the whole of the debt; and
(c) the debtor cannot repay a greater proportion of the debt;
the Secretary must waive the right to recover the remaining 20% or less of the value of the original debt.
Agreement for part - payment in satisfaction of outstanding debt
(4) If the Secretary and a debtor agree that the debtor's debt will be fully satisfied if the debtor pays the Commonwealth an agreed amount less than the amount of the debt outstanding at the time of the agreement (the unpaid amount ), the Secretary must waive the right to recover the difference between the unpaid amount and the agreed amount.
Limits on agreement to accept part - payment in satisfaction of outstanding debt
(5) The Secretary must not make an agreement described in subsection (4) unless the Secretary is satisfied that:
(a) the debtor cannot repay more of the debt than the agreed amount; and
(b) the agreed amount is at least the present value of the unpaid amount repaid in instalments whose amount and timing are determined by the Secretary; and
(c) it would take at least 12 months to recover the unpaid amount under this Part if subsection (4) did not apply.
Formula for working out present value of unpaid amount
(6) For the purposes of subsection (5), the present value of the unpaid amount is the amount worked out in accordance with the following formula:
where:
"annual repayment" is the amount of the debt that the Secretary believes would be recovered under this Part in a year if subsection (4) did not apply in relation to the debt.
"interest" is the annual rate of interest specified by the Minister in a written notice.
"repayment period" is the number of years needed to repay the unpaid amount if repayments equal to the annual repayment were made each year.
Example:
Facts: Terry owed a debt of $8,000 to the Commonwealth. He has repaid $2,000 with the remaining debt being $6,000.
Terry, with the assistance of his mother, offers to make a single payment of $4,700 in full satisfaction, leaving $1,300 of the debt unpaid. Without Terry's mother's assistance, Terry can only pay fortnightly instalments amounting to $1,200 a year and, at that rate, would take 5 years to pay the remaining $6,000.
Assume that the Minister has specified an interest rate of 10%.
Result: The present value of the unpaid amount of $6,000 to be repaid in 5 years at a 10% interest rate is worked out as follows:
As the proposed payment of $4,700 is more than the present value of the unpaid amount (which is $4,548 as shown), and as the other conditions in subsection (5) apply, the Secretary may accept Terry's offer and make an agreement with him as described in subsection (4).
If the Secretary makes the agreement, the Secretary must, in accordance with subsection (4), waive the remaining $1,300 of the debt (being the difference between the unpaid amount of $6,000 and the agreed amount of $4,700).
Notice is a legislative instrument
(7) A notice described in the definition of interest in subsection (6) is a legislative instrument.