Fri May 29

Government to repay 470,000 unlawful robodebts in what might be Australia's biggest-ever financial backdown

Written by Terry Carney, Emeritus Professor of Law, University of Sydney

In a near-complete capitulation, the government will refund every alleged overpayment it has collected from welfare recipients under the discredited “robodebt” system of income averaging.

Unveiling the automated system in mid-2016 then treasurer Scott Morrison and social services minister Christian Porter promised more “accurate and appropriate income testing ^[1]”.

They were going to work with the prime minister’s Digital Transformation Office to “cut red tape and ensure that mistakes are minimised ^[2]”.

The man who headed Digital Transformation Office at the time later described what happened as “cataclysmic ^[3]”.

Three quarters of a billion to be paid back

Almost half a million Australians received letters from Centrelink telling them they had been overpaid because the income their employer had reported to the Tax Office was more than the income they had reported to Centrelink.

Unless they explained why within 21 days, they would have an assessment made against them and be hit by a 10% recovery fee.

Many paid up, in part because the alleged overpayments went back six years or more, and the Centrelink website had only asked them to keep payslips for six months.

Hundreds of thousands of these assessments appear to have been wrong.

Rather than using the recipients’ actual in income in the fortnights for which benefits had been paid, Centrelink calculated an average fortnightly income over a longer period which often included fortnights they were in paid employment and not receiving Centrelink benefits.

November backdown

In November 2019 a week before it was due to defend a test case brought by a 33-year-old local government worker, and after press reports that its own lawyers had told it such collections were unlawful ^[4], the government conceded all points ^[5] and abandoned income averaging.

A court order ^[6] declared that the debt notice was not validly issued because the decision-maker could not have been satisfied that the debt was owed.

At the time the minister for government services Stuart Robert described the decision not to proceed with income averaging as “a refinement” that would affect a “small cohort ^[8]”.

On Friday, ahead of the hearing of a larger class action, Mr Robert announced that the government would refund everything collected ^[9] under the scheme, whether it was calculated using partial or whole income averaging.

The refunds will be paid to all 470,000 Australians who have had debts calculated using income averaging, whether they had paid up voluntarily or not.

Now the half a million repayments

Included in the refunds will be interest charged and collection fees charged, at an estimated total cost of A$721 million ^[10].

What the Government has not agreed to is damages for harm and suffering of supposed debtors, which were sought by the class action ^[11]. Although liability for damages is more difficult to establish, the class action is unlikely to abandon the attempt to obtain compensation.

The harm suffered by many of those caught up by the Government’s illegal and immoral robodebt scheme is an injustice still to be rectified.