Government blasted for continuing to chase welfare debts

The government has been blasted for continuing to chase Australians to pay their welfare debts even after it conceded its scheme was illegal.

A federal watchdog has blasted the government for continuing to chase Australians to pay their welfare debts even after it conceded its automated compliance scheme was illegal.

In the latest twist in the robodebt scandal, the Commonwealth Ombudsman has concluded Services Australia caused “unnecessary hardship” by continuing to pursue debts despite the high risk that they were raised with “legally insufficient” information.

And the watchdog has raised the alarm that Services Australia may try again to claw back debts that it has already had to refund, despite doubt about whether its system is now up to scratch.

Scott Morrison last year apologised for the “hurt or harm” caused by robodebt as the government paid back more than 500,000 people and struck a $1.2bn deal to avoid a class action trial.

The compliance scheme was deemed to be illegal in November 2019 because of its reliance on averaged income information from the Australian Taxation Office.

But ombudsman Michael Manthorpe found that despite the government confirming income averaging was “legally insufficient” at the time, it continued to recover debts for months before confirming it would refund repayments and wipe debts in May last year.

Prime Minister Scott Morrison. Picture: NCA NewsWire / Gary Ramage

In a report released on Tuesday, he said this “created a high degree of risk”, and Services Australia should have instead paused all debts raised under the income compliance program.

About 70 per cent of debts identified by compliance actions were raised through income averaging, although each had to be assessed manually because the government did not always record how debts were raised.

Mr Manthorpe said this created “significant risk of inappropriate debt recovery action”.

He warned the problems were compounded by the failure of Services Australia to communicate directly to Australians affected by robodebt — including thousands still making voluntary repayments — for six months after the government knew it was unlawful.

Mr Manthorpe asked Services Australia whether it “intends to revisit and potentially re-raise debts” for individuals who received refunds or who had their debts wiped.

“It advised that it is considering the circumstances in which this may be appropriate,” he said.

“We do not consider that Services Australia has been sufficiently transparent with individuals about the possibility that this may occur. For those individuals who have had income averaged debts refunded, any future decision by Services Australia to revisit and re-raise debts for the same debt period may cause distress.”

He said it was “not clear that Services Australia has sufficiently robust procedures” to collect adequate information from welfare recipients to lawfully calculate their income.