$721m to be refunded after robodebt backflip

The Morrison government will refund $721 million raised against 470,000 debts under its controversial robodebt scheme, Government Services Minister Stuart Robert says.

The embarrassing backflip announced late on Friday comes after the government paused recovery of robodebts late last year and ahead of a class action lawsuit scheduled to be heard in the Federal Court in July.

Mr Robert said the government was taking “responsibility for upholding the integrity” of the welfare system, while Labor said the decision was about keeping ministers out of the witness box.

The government has been under fire for more than three years over its robodebt scheme which caused distress to welfare recipients by demanding they repay money often not actually owed.

Debt notices, sometimes totalling thousands of dollars, were automatically generated over alleged discrepancies between self-reported income and tax office records.

However, Mr Robert has previously admitted about 20 per cent of the debt notices were withdrawn after welfare recipients contested their accuracy.

“We have advice now that shows when the program started five years ago the information for the use of averaged ATO income was not sufficient,” he said.

“From July this year, Services Australia will refund all repayments made on debts raised wholly or partially using income averaging of ATO data.

"Refunds will also be made for any interest charges and/or recovery fees paid on related debts.”

Departmental emails provided to a Senate inquiry revealed the government became aware in November last year that robodebts were not lawful.

"They [the Department of Social Services] have received legal advice that debts based solely upon DSS own income averaging of ATO annual tax data are not lawful debts," the email said.

At the same time, Gordon Legal launched a class action lawsuit against the government saying debt recipients "should be compensated".

Labor government services spokesman Bill Shorten said the government had been “dragged kicking and screaming to do the right thing by the Australians they ripped off" and now they were hiding from scrutiny.

“The government has for years illegally been taking people’s money,” Mr Shorten said, and "they are only doing this now to keep their ministers out of the witness box".

“These ministers would rather cut cheques than explain their own shoddy conduct.

“They will still have to account to the families who lost adult children to suicide because of robodebt, and for the various other harms, stresses and inconveniences caused.”