What exactly is robodebt? We’ve heard all the buzz, now it’s time to know what this controversial government scheme actually is.

Unless you’ve been living under a rock, you’ve probably heard all the buzz about robodebt. The infamous government program has recently been making headlines, so it’s no surprise that Australians (as well as the rest of the world) have plenty of questions.

Activists and critics call it robodebt, but how does this system actually work?

What is robodebt?

To fully understand how the robodebt saga unfolded, we must first discuss how the controversial system came to be.

The Department of Human Services, which oversees Centrelink, has been using an automated Employment Income Confirmation system to identify possible overpayments of welfare benefits. It’s a system that is designed to perform data-matching by comparing the averaged income data from the Australian Taxation Office against previously declared income information reported back to Centrelink by those that claim payments. Ultimately, the system was created to calculate the Centrelink payments people should get.

But this system was only used as the starting point for assessing whether a person had been overpaid and has a recoverable debt. If a discrepancy was identified, a Centrelink officer would launch an investigation and ask the person to provide additional information about their income statement (e.g. a bank statement or a payslip).

If the person could not provide the additional information requested, Centrelink would often contact the employer directly or write to the bank before deciding if they have been overpaid. After the assessment, it is only then that the Centrelink writes that person a letter, and says they must repay a certain amount of money.

 What went wrong? 

In July 2016, the system with human oversight was significantly minimised with the introduction of the Online Compliance Intervention (OCI) system. The system was widely criticised for utilising computer algorithms to collect debts against hundreds of thousands of welfare recipients without proper assessment. The raised debts from the faulty system were called robodebts.

If the system detected a difference between the data that Centrelink and ATO have, a letter advising of a potential debt will be sent out to provide further detail about your income. However, if you did not reply, Centrelink will only use the information about your income from the ATO and average it over multiple fortnights to determine the debt. The automated data-matching technique then sent out computer-generated Centrelink debt notices to welfare recipients who had been potentially overpaid.

People criticised this process because the income averaging system used by the ATO was not reflective of their actual income each fortnight for the debt period. This is because for most Centrelink payments, the amount a welfare recipient is entitled to depends on the income they received in the last fortnight and not based on annual income.

People were automatically contacted if Centrelink estimated they have a debt of more than $1,000. However, reports showed that one in five debt letters sent was based on false information. Before the OCI system was in place, the average number of interventions were 20,000 annually. However, with the introduction of the robodebt system, the number surged to 20,000 per week.

But the problem didn’t stop there. Centrelink debts were raised for payments made up to seven years ago, increasing the pressure and difficulty for people to prove they have not received compensation that was entitled to them if they could not provide old payslips or bank statements.

How did the Amato case impact the system? 

Since 2016, there have been calls from critics and welfare recipients to halt the robodebt due to the high number of errors and miscalculations found within and by the system. A report from ABC news estimated that the government incorrectly took around $721 million from over 400,000 people since the robodebt system was implemented, with some people receiving multiple notices.

In November 2019, the Victoria Legal Aid brought a case on behalf of welfare beneficiary Deanna Amato to ask the Federal Court to check whether the government acted on a lawful basis in raising her Centrelink debt by substituting her fortnightly reported earnings with averaged ATO income data and adding a penalty fee when they did not receive a feedback from her regarding the matter.

The Australian government conceded that the averaging process using ATO income data was not a lawful way to accurately calculate a debt.

The Amato case was followed by a class action from Gordon Legal on behalf of the many thousands of people with unlawful robodebts. In November 2020, the law firm announced that the federal government agreed to a settlement worth $1.2 billion. The amount included the $721 million the government had already agreed to repay in wrongfully collected debts announced in May 2020. The settlement included $112 million in compensation and a decision to drop a further $398 million in debts wrongly raised.

The aftermath

Following the Federal Court class action, the government announced that all unlawful robodebts would be cancelled. People who have already paid robodebts will be refunded with the amount that they paid between July and November 2020.

In the political sphere, Malcom Turnbull, who was the prime minister when the scheme was rolled out, apologised for the system. Current Prime Minister Scott Morrison also apologised for any “dismay and distress” caused by the robodebt scheme. Despite this, Government Services Minister Stuart Robert noted that “the Commonwealth has not accepted or admitted any liability in the matter”.

The federal government also announced that it would stop the income averaging part of the scheme. The Labor Party and the Greens are seeking to have the matter investigated by a royal commission.

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