Robodebt victims to get $1.2bn in compo

The Morrison government will compensate 430,000 welfare recipients wrongly accused of misreporting income after agreeing to a $1.2bn settlement, the country’s largest class-action payout.

Former human services minister Alan Tudge. Picture: Getty Images

The Morrison government will compensate 430,000 welfare recipients wrongly accused of misreporting income after agreeing to a $1.2bn settlement, the country’s largest class-action payout.

In a deal struck before a Federal Court trial was set to begin on Monday, victims of the so-called robodebt scheme will receive $112m in compensation, be paid back $720m and have $400m in unlawful demands wiped.

Labor government services spokesman Bill Shorten, who instigated the case, said the robodebt scheme was an “illegal protection racket”.

“Call me a bit sceptical, but the only reason why the Morrison government surrendered was they had the hot breath of the court on their throat,” he said.

But as part of the settlement, the government will not admit to any liability of knowledge of the scheme’s unlawfulness.

Labor is pushing for a royal commission, and is pursuing former human services minister Alan Tudge and Government Services Minister Stuart Robert over the bungled scheme.

The government struck the 11th-hour deal with law firm Gordon Legal on Monday, the day the case was scheduled to begin in the Federal Court, ensuring that ministers would not have to app­ear at the hearings.

With the government refusing to accept legal liability for the scheme, Scott Morrison said he would not offer a fresh apology to the Robodebt scheme’s victims.

“I made remarks on that in the parliament earlier this year. I can only refer you back to those where I did just that (apologise),” the Prime Minister said.

Mr Morrison defended Mr Robert, a key factional ally, and declared that the government had already paid out more than $700m to victims of the scheme.

“There is a bit more to go,” he said. “What I would say is that we are righting a situation which has found to have been present in this program over two governments and we are dealing with income-averaging being used as a basis for raising debts.”

In September 2019, Mr Shorten used his first post-election press conference to declare he believed the robodebt scheme — which used annual pay data obtained from the Australian Taxation Office to pursue welfare recipients it accused of understating income — to be illegal.

At the time Mr Robert labelled the move a “political stunt” but was forced to recant when a test case in the Federal Court found that the practice was unlawful.

Lawyers for the class action ­argued that Centrelink’s use of averaged tax office information to reassess a recipient’s welfare ­entitlements did not provide a valid basis to allege the recipient had been overpaid and therefore owed the government a debt.

Using averaged income data to pursue debts has been a practice since the Hawke-Keating governments, but the Turnbull government controversially automated the process in 2019.

Under the class action settlement, pending Federal Court approval, the Commonwealth will pay $112m in compensation to more than 430,000 victims.

The commonwealth will also have to repay more than $720m in debts collected from group members invalidly, and it will continue to provide refunds. Outstanding claims for approximately $398m in debts will also be dropped.

A Settlement Distribution Scheme will ensure that eligible individual entitlements are assessed and all amounts due will be paid in 2021.

Gordon Legal partner Andrew Grech said the settlement was an “exceptional outcome” for the members of the class action.

“I think no money amount will ever compensate people for the hardship they have been through,” Mr Grech said. “We think that the settlement that’s been achieved overall is fair and reasonable and in the best interests of group members, having ­regard to the litigation and what it would achieve for them.”

Mr Grech said the process to determine the legal fees would start once the Federal Court had approved the settlement.