Centrelink debt recovery

Robodebt: government to refund 470,000 unlawful Centrelink debts worth $721m

Debts raised under the Coalition’s unlawful income-averaging scheme will start to be repaid in July

The federal government has finally agreed to pay back hundreds of thousands of people who were hit with unlawful and incorrect Centrelink debts over a four-year period through the Coalition’s botched robodebt scheme.

Years after vowing to recoup at least $3bn from welfare recipients and doggedly defending the program’s legality, the government said on Friday it would repay 470,000 debts that were entirely or partially raised using the discredited “income-averaging” calculations.

Stuart Robert, the government services minister, said the refunds would be received by 373,000 people, cost a total $721m and would include recovery fee charges. The debt refunds would begin from July, he said.

Robert, who was also the human services minister in 2015 when aspects of the robodebt scheme were established, did not apologise on Friday, saying the scheme “was developed to make identifying welfare overpayments more efficient”.

The announcement, delivered in the shadow of a federal court class action, confirmed reporting by the Guardian revealing the government had privately acknowledged it would need to pay back hundreds of thousands of people.

Robert’s statement did not say whether the government would agree to pay interest on the debts, a key demand from the class action led by Gordon Legal.

The firm, which is also seeking compensation, vowed on Friday to continue to pursue compensation, arguing the court should approve the refunds process to ensure victims maintained their rights to claim damages and interest.

Guardian Australia has previously revealed the government was reluctant to pay interest and that the Commonwealth’s legal team was instructed to oppose interest repayments in mediation, which is due to begin next month.

It is also understood no decision has yet been made on the future of the program.

But Robert said on Friday the government would “move forward with our income compliance program with further proof points to ensure it remains sufficient”.

“The government started this program over half a decade ago based on the best information at the time,” he said.

“The information presented to me saw a change in November, I acted swiftly on behalf of the government to pause debt recovery and to refine the system. So again, we’re moving forward on the best information we have.”

Bill Shorten, Labor’s government services spokesman, said the government only offered the refund because a court date had been set for July.

“Government ministers were going to have to turn up to court in empty witness-box seats and explain what they knew, when they knew, why the federal government … had been taking hundreds of millions of dollars off vulnerable Australians and why they had no legal authority to do these actions,” he said.

The Greens senator and long-time robobdebt critic, Rachel Siewert, said it was a “historic day”.

“I am overwhelmed thinking of the untold suffering that this illegal scheme has caused,” she said.

The origins of the robodebt scheme date back to July 2015 and involved a combination of data-matching to identify potential targets and faulty debt calculations by “income averaging” annual tax office pay data and comparing it to fortnightly pay declared by welfare recipients.

It also featured a heavily reliance on Centrelink labour hire staff tasked with calculating debts and sending out letters, while millions were spent contracting private debt collection agencies to chase up people who ignored debt letters.

During the 2016 federal election, the Turnbull government promised to bolster the program, which was yet to cause great scandal, promising to enhance income-data matching by using ATO pay data to chase up alleged debts.

But in late 2016, the scheme erupted in scandal as a growing number of people started complaining about receiving debts. Centrelink had boosted “compliance interventions” from 20,000 per year to 20,000 per week, according to then human services minister Alan Tudge.

Since then, critics have argued the system relies on a crude calculation of a person’s income, by taking annual income data held by the tax office and “averaging” it over each fortnight.

In order to challenge the debt, welfare recipients were told to provide payslips or bank statements to prove the income they had reported to Centrelink at the time was correct.

Scheme becomes scandal in 2016

In late 2016, Christian Porter, the social services minister at the time, made a virtue of the fact most debts were simply calculated using the ATO averaged calculations.

Defending the scheme, he said: “Monies are being identified and being paid back to the taxpayer – indeed, $300 million so far, with a tiny complaint rate, and only in a very rare and few instances, indeed 2.2%, has there even been the requirement for documentary evidence to be provided.”

In November, the government settled a federal court case brought by Victoria Legal Aid and announced it would no longer raise debts without first gathering evidence – such as payslips – to prove a person had underreported their earnings to Centrelink.

But at the time, Robert refused to apologise, describing the change as only a “refinement” and saying only a “small cohort” were affected.

In fact, secret government documents seen by the Guardian show Services Australia believes the scheme is only viable if it is able to demands welfare recipients to gather this evidence from the past employers’ in order to prove they did not owe the debt.

The debts related to alleged overpayments dated as far back as six years, by which point many recipients had changed employers and stopped receiving benefits.

Robert claimed on Friday he had acted as soon as “information came to light that showed there was a lack of sufficiency” around the debts raised using “income averaging”.

But although the scheme was not challenged in the courts until last year, the government was warned about its shaky legal foundations in 2017 when a senior member of the Administrative Appeals Tribunal ruled five times that debts raised under the scheme were unlawful.

The first of two Senate inquiries into the scheme in 2018 heard claims from Greens senator Rachel Siewert that the families of at least five people said receiving a robodebt letter was a factor in their death.

Government advice seen by the Guardian showed the government expected in March to administer about 450,000 refunds, and that legal advice advised officials to seek a settlement on the basis it would likely lose in court on the “unjust enrichment” claim.

It abandoned a planned ramp-up of the scheme after Guardian Australia reported a leaked plan to target the vulnerable in 2019.

Do you know more?  luke.henriques-gomes@theguardian.com