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Part 4 : Overpayments and recovery

3.4.1 Overview

This Part describes what happens if a member is paid more than their entitlement.

3.4.2 Overpayment

  1. If a member has been paid more than they are entitled to, they must repay to the Commonwealth the difference between their entitlement and the amount they were paid.

    Example: If the member received vehicle allowance, travelling allowance, or used a travel card in advance and they do not undertake the travel, they must repay the whole amount. If the travel is shorter than expected, they must repay the excess part of the allowance.

  2. When tax has been deducted from the amount overpaid and the amount was paid in a previous financial year, then either of these two options is available.

    1. Defence will amend the member's Payment Summary for the previous financial year. The member must then amend their income tax return for that year by excluding the overpaid amount. The member will receive a refund from the Australian Taxation Office of the tax overpaid. The member repays the overpaid amount, including any Pay as You Go (PAYG) Withholding, to Defence.

    2. The member's gross salary is reduced by the gross amount overpaid.

      Example: A member received a promotion but was paid a higher salary from an incorrect date. They were not notified of the error until after 1 July. The member repays the gross amount either in full or by instalments, by arranging for a reduction in their gross salary.

    3. Note: If a member repays their overpaid salary amount by instalments, a loan fringe benefit may arise.

      See: Tax alerts

3.4.3 Recovery of overpayment

  1. Defence may recover an overpaid amount of salary or allowances from the salary and allowances that are or become payable to a member.

  2. The Commonwealth reserves the right to recover the overpaid salary or allowances by other means.

  3. Note: Chapter 9 of FINMAN 5 set out the procedures for dealing with overpayments.

    See: FINMAN 5 Chapter 9, Managing debt

Application to Reservists: Yes.

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Further info

  • FINMAN 5 Chapter 9, Managing debt (This document is available on the Defence intranet or through the Defence Service Centre.)
  • Tax alert, item 12


Defence Service Centre

1800 DEFENCE (1800 333 362)