The Federal Government will cancel most welfare debts below $250 and roll out a compensation scheme for people unlawfully given historic debts.
Those who were indebted to Centrelink from its old ‘income apportionment’ method could be eligible for $600 payments.
Social Services Minister Tanya Plibersek said: “Debt recovery processes must be fair and transparent.”
The Opposition said it’s likely to support the measure, and the Greens called the move a “tremendous win”.
Apportionment
Income apportionment was a way to calculate whether a welfare recipient owed a debt to Centrelink.
Welfare payments are typically paid on a fortnightly basis. Jobs may pay employees on a different frequency, however.
The Commonwealth Ombudsman has found that until 2020, Centrelink spread income “across the payslip period, instead of within the one Centrelink fortnight.” This meant income could be listed in fortnights “when it was not earned,” leading to over and under-payments.
This is different to income averaging, which was used in the Robodebt program.
Robodebt was a Government debt collection used for welfare recipients from 2015 until 2019.
The system checked recipients’ reported fortnightly income against the annual income they declared on their tax returns. If this suggested they had been overpaid, a debt notice was issued without human oversight.
This method was error-prone and illegal, resulting in over $1.7 billion in unlawful debt notices.
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Govt plans
In 2023, the Commonwealth Ombudsman found that income apportionment was unlawful and had resulted in tens of thousands of wrongful debts.
The Government said it will bring in “resolution payments” of up to $600 for those affected by the debts.
It plans to bring in legislation to introduce the measures, which it says will “avoid the need to recalculate potentially millions of debts at a significant cost to Australia’s social security system.”
Small debts
Currently, most debts under $50 are waived if they are considered “small” and “accidental”. This can increase to $200 depending on the debtor’s personal circumstances.
The Government has said it will increase the waiver threshold to $250, which it estimates will cancel out 1.2 million debts over the next year.
“Often, the administrative cost of recouping small, accidental debts is higher than the value of the debt itself, making the process of debt recovery uneconomical,” the Government said in a statement.
The Government said it wouldn’t waive debts of those suspected of fraud, or who have a history of “non-compliance”.
In a statement, Social Services Tanya Plibersek said the measure is designed to “spare Australians with small debts significant stress.”
Finance Minister Katy Gallagher added: “The last thing vulnerable people need is to be hounded over small debts that are not worth the time or money to recover”.
