Customer compensation and act of grace payments 109-07040000

Typically, compensation claims are made by customers who have suffered a loss:

• because they relied on incorrect or incomplete advice provided by an agency officer
• (such as a personal injury) because of the agency’s error/s or failure to act
• because the agency failed to follow existing procedures or have appropriate procedures in place
• because the agency failed to provide proper advice that was within its power to give
• because of a breach of privacy by the agency or one of its officers

Customers may apply for compensation for losses they have suffered because of errors, which may have occurred across any master program.

Service delivery issues such as poor customer service or inappropriate behaviour by agency officers, or a customer disagreeing with the eligibility criteria for a payment or service, is not defective administration.

Compensation cannot be claimed for a debt owed to the Commonwealth, even if the debt arose because of defective administration. If a customer has a debt they do not think they should have to pay, they may wish to apply for a debt waiver from the Department of Finance.

Not all mistakes made by the agency can be remedied by a compensation payment. For example, compensation may not be payable if there is a legislative mechanism that can remedy the mistake (a legislative right of review).

If a customer wants to claim compensation or an act of grace payment, encourage and help them to:

• consider whether there is a quicker and simpler way to address their concern, such as making a complaint, providing feedback or requesting a review
• read the information on the Services Australia website about claiming compensation

A customer does not need to exhaust their review and appeal rights before lodging a claim for compensation or an act of grace payment.

Note: never discuss the possible outcome of a compensation claim.

The legal or administrative mechanism used to deal with a compensation claim will vary depending on the nature of the claim and whether the agency considers it may be legally liable if the matter went to court. See below for more information.

Identification of potential legal liability is the first step in the compensation process. If legal liability is ruled out, the compensation claim will be considered under the Scheme for Compensation for Detriment caused by Defective Administration.

Legal liability

If it is reasonable to conclude that the agency would be found liable if the matter were litigated in court, a claim must be settled in accordance with Appendix C: Handling Monetary Claims set out in the Legal Services Directions 2025 issued by the Attorney-General under section 55ZF of the Judiciary Act 1903.

Scheme for Compensation for Detriment caused by Defective Administration (CDDA)

This is a discretionary mechanism that allows the agency to pay compensation when a person or organisation has suffered detriment because of the agency’s defective administration and when there is no legal requirement to make a payment.

Compensation claims are assessed by the Review Investigations Team per guidelines issued by the Department of Finance (Resource Management Guide 409). The Guide 409 is published on the Department of Finance website. See References for a link.

Act of grace payments

The act of grace power is intended to ensure consistency and equity in the impact of government activities where other legislative and administrative provisions do not take sufficient account of the unique circumstances of individual cases.

Act of grace decisions are made by the Department of Finance. Section 65 of the Public Governance, Performance and Accountability Act 2013 allows the Finance Minister or their delegate to make payments that would not otherwise be authorised by law. Information about the act of grace is provided in Resource Management Guide 401, available on the Department of Finance website. See References for a link.

Waivers of debts

The CDDA Scheme must not be used to offset debts that are owed to the Commonwealth, even if those debts have arisen due to defective administration.

If a person has incurred a debt due to defective administration and does not consider they should have to repay it, they can apply to the Department of Finance for consideration under the waiver of debt mechanism. Information about waiver of debt is provided in Resource Management Guide 401 available on the Department of Finance website. See References for a link.

The Process page contains more detail for specialist officers.

The References page contains links to the relevant policy and legislation.