The government has announced it will refund $721 million it claimed as part of its unlawful 'robodebt' scheme

• The federal government has announced it will refund $721 million which it claimed as part of its ‘robodebt’ scheme.
• The robodebt scheme attempted to identify social security ‘overpayments’ and recoup money the government said was owed to it, but it was controversial from the beginning.
• Refunds will be issued from July.
• Visit Business Insider Australia’s homepage for more stories.

The federal government has announced it will scrap its controversial ‘robodebt’ scheme, which attempted to automatically claw back alleged overpayments to social security recipients, and will refund $721 million to those who already paid.

A statement from government services minister Stuart Robert announced Services Australia would “refund all payments” which were raised as part of the robodebt program. The minister said the department had identified 470,000 affected debts, which are now set to be wiped and refunded.

The robodebt scheme, which began in 2016, was criticised from the outset. Many current and former benefit recipients received letters accusing them of having been overpaid, and that they now owed the government money.

The problem was, as many recipients and activists pointed out, the debts were often wildly overinflated as they were calculated with a formula which averaged out income and earnings over a series of fortnights, rather than identifying what was earned in a particular week. This led to situations where casual workers or sole traders with inconsistent earnings had their incomes averaged incorrectly – leading to debts which were either overestimated or entirely invalid.

It was a rotten scheme at its core, more focused on maximising the money ‘recouped’ for the government and being punitive than any sort of managerial competence. On numerous occasions, robodebts were found to be unenforceable by the Administrative Appeals Tribunal due to a lack of concrete proof that debts were actually owed.

In March, The Guardian reported the government had privately conceded it would have to refund more than 400,000 payments, as the prospect of losing a class action lawsuit from robodebt recipients loomed.

Regardless of the total collapse of the program, Robert stands behind the government’s effort towards “upholding the integrity of Australia’s welfare system”.

Stuart said that averaging of ATO data was no longer used to calculate debts as part of the Income Compliance Scheme as of November, with the suggestion being that any debts raised since then are valid.

“The Income Compliance Program was designed to make identifying welfare overpayments more efficient,” his statement reads. “It assisted with reviews where customers did not respond, or fully engage, with requests to clarify discrepancies between income earnings reported to Centrelink and the Australian Tax Office.”

This effort towards ‘efficiency’ would likely have been little consolation to those who received debt notices under an unlawful scheme.

Refunds will start being issued in July.