Centrelink forced to wipe or change one in six robo-debts

Photo by Dave Hunt/AAP
 By Christopher Knaus (The Guardian 14 Feb 2018)

Only about $84m in Centrelink debts have been recovered in 14 months, far below the $350m identified by the automated system. 

Centrelink was forced to either wipe or change one of every six debts it raised against welfare recipients in the first year of its so-called robo-debt saga, new figures show.

About 29,000 of the 165,000 debts raised against welfare recipients were either wiped to zero, reduced partially, or revised upward in the 14 months between July 2016 and September last year.

The government has also only recovered about $84m of $350m debts the automated system identified over the same time period.

The new data, contained in departmental responses to a Senate inquiry, again confirms problems with the government’s automated debt recovery system, known as robo-debt.

The automated system came under significant scrutiny last summer. For many years, the recovery of welfare debts has relied on a process of automated data-matching to compare what welfare recipients told Centrelink against their tax records.

But the system changed significantly from July 2016, when the government reduced a layer of human oversight, significantly ramped up its recovery efforts, and funnelled debtors onto a new online portal.

Where previously compliance teams would manually check discrepancies in tax and Centrelink records, the new system immediately sent a letter to the welfare recipient, shifting the onus onto vulnerable Australians to prove they had not been overpaid.

Thousands of letters were sent to the wrong address and others were misunderstood or disregarded, either due to confusing wording or because the recipient could not find years-old payslips or bank statements to prove their income.

If a welfare recipient didn’t respond, a flawed process was used to calculate their debt, which involved averaging out their yearly income across all 26 of Centrelink’s fortnightly reporting periods. The process led Centrelink to assume, often falsely, that a welfare recipient had worked across an entire year and was ineligible for welfare.

External debt collectors were brought in if an individual failed to pay or respond to Centrelink with updated information.

New figures were given to a concluded Senate inquiry into the robo-debt system on Tuesday, in response to questions on notice posed by Labor and the Greens last year.

They showed that 10,560 debts were issued and then later reduced to zero in the 14 months between July 2016 and September last year. That’s about 6.4% of the total 165,000 debts raised during the period.

A total of 29,000 debts were either reduced, increased, or wiped completely, after new information was received from the welfare recipient. That meant the amount of debt raised by Centrelink was $15m less than the total initially demanded of recipients.

The government has routinely said the reduction of debts does not show flaws, but rather that welfare recipients can provide Centrelink with new, accurate information about their income and have their debts adjusted accordingly.

But critics say many people would have simply paid the initial debt without checking, either because they trusted the government, were confused, or were unable to track down the proper evidence to prove otherwise.

The shadow human services minister, Linda Burney, said the government ought to apologise to those affected.

“Receiving these kinds of debt notices can be a very anxious experience for people who are already managing very difficult and complex personal circumstances,” Burney said.

“The government should apologise to the over 10,500 people whose debts were reduced to zero.”

A spokesman for the Department of Human Services, Hank Jongen, said improvements had been made to the system. He said the department supported a “flexible, fair, and realistic approach to debt collection”.

“Taxpayers are happy to support those who are in genuine need but they expect integrity in the system, and the online compliance intervention is just one activity in place to achieve this,” Jongen said.

Jongen said the department considered an individual’s financial and personal circumstances when negotiating payment arrangements. That helped to explain the discrepancy between the volume of debts identified ($350m) and debts recovered ($84m). He said debts were not always recovered immediately, or even within the same financial year they were raised.

Jongen cited the commonwealth ombudsman report that said it was fair and reasonable for the department to ask customers to explain discrepancies in the information they reported to Centrelink.

The ombudsman’s report made a series of criticisms of the system and the department’s approach to its implementation, but also found it was able to accurately calculate debts if it was given the right information.

The government is continuing its crackdown on overpayments to welfare recipients and still boasts of its ability to use automated data matching processes to claw back debts.

Last week, it claimed the system was allowing it to conduct 600,000 checks every year, which it said was “half a million more than when Labor were in government in 2012-13”.

Jongen said department paused the mailout of initial letters in early November so that people did not receive “a debt notice over the Christmas period”.

The letters resumed in mid-January this year.


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