Coronavirus: Centrelink to refund $721m welfare recouped under robodebt

The government will refund more than 370,000 Australians $721m recouped under its flawed ‘robodebt’ welfare overpayment scheme

Government Services Minister Stuart Robert. Picture: AAP

The Morrison government will refund more than 370,000 Australians $721m recouped under its flawed “robodebt” welfare overpayment scheme after Government Services Minister Stuart Robert said the system was “not sufficient under law”.

With a class action over the scheme still pending, Mr Robert announced the refund late on Friday, saying all welfare payments the government had recovered that had been calculated using the Australian Taxation Office’s discredited income averaging method would be repaid, along with interest and recovery fees.

"We have advice now that shows that when the program started five years ago, the information for the use of averaged ATO income was not sufficient and further proof points were needed,” Mr Robert said.

"So, therefore, we will return that money and move forward with our income compliance program with further proof points.”

The quantum of the refunds, which Mr Robert said would start rolling out automatically in July, will not help the government’s already tenuous budget position as it deals with the enormous economic impacts of COVID-19.

The scheme, part of the government’s “income compliance program”, cross-referenced ATO and Centrelink data to examine whether welfare payments had been overpaid. If a recipient didn’t respond to requests for information, it used an automated system that relied on income averaging.

It has been estimated one in five debt letters since the scheme was introduced in 2016 was based on incorrect information.

The Federal Court last year ruled the system unlawful, saying Centrelink could not have been satisfied the required repayments were correct.

Mr Robert said 470,000 debts had been raised against 373,000 people worth $721m.

Services Australia had identified 190,000 of those with money owing, he said, and was working on identifying the remainder.

Opposition government services spokesman Bill Shorten said Mr Robert had spent months denying such a system was unfair, inaccurate or illegal. “Only when confronted with the prospect of 470,000 quiet Australians getting their day in court has this government embarked on a backflip for the ages,” Mr Shorten said.

“They have been dragged kicking and screaming to do the right thing by the Australians they ripped off.” Mr Shorten said the government was capitulating to “keep their ministers out of the witness box”, but would “still have to account to the families who lost adult children to suicide because of robodebt”.

The class action, being run by Gordon Legal, was set for a mediation hearing next week, but the law firm said there were still matters outstanding.

“We welcome the government’s announcement that it has now conceded that it has to pay back the money it is holding unlawfully,” Gordon Legal partner James Naughton said.

“Our clients do not consider that it is reasonable that the government, having now conceded that it acted unlawfully, should unilaterally decide that it can take its time to pay it back and not be responsible to those affected for the loss and damage its unlawful conduct has caused,” he said.