Australian government to refund 470,000 unlawful welfare debts

By on 01/06/2020 | Updated on 24/09/2020
A photo of Centrelink offices, which provides for Services Australia executive agency that comes under the purview of the Department for Social Service
A photo of Centrelink offices, which provides for Services Australia executive agency that comes under the purview of the Department for Social Service. Image: David Jackmanson/flickr

The Australian government is to refund AUS$721m (US$486m) worth of debts it unlawfully claimed from welfare recipients through its controversial ‘robodebt’ income compliance scheme.

The news comes after a leaked document revealed government officials’ verdict that the scheme – which has been the centre of a long-running scandal and the subject of numerous legal challenges – is “no longer viable or cost effective” and should be abolished.

Centrelink, the agency tasked with delivering social security payments, used the robodebt calculation system to work out people’s income. The system measured earnings over a short period and assumed that they remained steady over the year, meaning many people were incorrectly identified as having been overpaid welfare payments and were forced to pay non-existent debts.

The government has admitted the scheme was unlawful and agreed to refund 470,000 ‘debts’ paid by 330,000 people as a result of the flawed system since 2015. However, it has consistently refused to apologise for the mistakes which, critics say, exacerbated mental health illnesses in some of the country’s most vulnerable people and may have led to suicides.

“What we do acknowledge is that using average annualised ATO [Australian Tax Office] data, which many governments have done, Labor and Liberal, has as it transpired, been shown to be an insufficient basis for raising those debts,” attorney-general Christian Porter, a former social services minister who oversaw the expansion of the scheme, told the ABC’s Insiders programme on 31 May. When pressed during the programme on whether the government would apologise, Porter refused.

Services Australia: scheme should be scrapped

A leaked document, prepared in February and seen by The Guardian last week, advised that the scheme be abandoned.

The document was produced by Services Australia – the agency responsible for delivering welfare payments, of which Centrelink forms part – and sent to Porter, government services minister Stuart Robert, and minister for families and social services Anne Ruston. 

“The income compliance program is currently estimated to deliver AUS$2.1bn [US$1.4bn] in fiscal savings and AUS$1.2bn [US$808m] in underlying cash over the forward estimates to 2023-24,” the agency said in the ministerial submission. “However, the program is no longer viable or cost effective given legal advice about the use of averaged ATO income data.”

The agency had demanded bank statements from those welfare recipients who said they could not obtain payslips – some going back six years – from past employers. It explained in the leaked document that it had been advised by a government lawyer that it was “not possible to use bank account information, by itself, to raise debt” and that as such, compliance officers would have to spend more time seeking payslips from welfare recipients and employers, some of whom may no longer be in operation. “Consequently it is uneconomic to continue the program,” it said.

Winding up the scheme?

Guardian Australia understands the government has considered winding up the income compliance scheme, which would cost AUS$700m (US$473m) over the forward estimates, but is yet to decide.

Robert insisted last week that the government would continue to pursue income compliance debts, but only after seeking legally sound evidence in the form of payslips from welfare recipients.

He described the decision to no longer issue debts raised using “income averaged” ATO pay data as a “refinement” and said it would “continue its income compliance framework going forward”.

In another document leaked to The Guardian, the Australian government acknowledged that the practice of income-averaging calculations may have resulted in more than the 470,000 unlawful debts already identified for refunds. However, the government has no plans to refund debts paid before 2015 because it believes it would be too difficult to identify victims. The government has promised only to issue refunds to “all income compliance debts raised from our use of income averaging since 2015-16”.

The government agreed to pay the debts ahead of a federal court class action brought by Gordon Legal. Since the announcement, the law firm has vowed to pursue compensation for those affected as well as interest on debts.

About Mia Hunt

Mia is a journalist and editor with a background in covering commercial property, having been market reports and supplements editor at trade title Property Week and deputy editor of Shopping Centre magazine, now known as Retail Destination. She has also undertaken freelance work for several publications including the preview magazine of international trade show, MAPIC, and TES Global (formerly the Times Educational Supplement) and has produced a white paper on energy efficiency in business for E.ON. Between 2014 and 2016, she was a member of the Revo Customer Experience Committee and an ACE Awards judge. Mia graduated from Kingston University with a first-class degree in journalism and was part of the team that produced The River newspaper, which won Publication of the Year at the Guardian Student Media Awards in 2010.

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