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Centrelink must review welfare debts after tribunal casts further doubt on income averaging, senator says

Luke Henriques-Gomes
·4-min read
<span>Photograph: Mick Tsikas/AAP</span>
Photograph: Mick Tsikas/AAP

The independent senator Rex Patrick has called for a sweeping review of Centrelink welfare debts, after the federal government was again rebuked at the Administrative Appeals Tribunal over its methods.

The AAT, which reviews social security decisions, recently ruled in two decisions that debts imposed on two welfare recipients by Centrelink could not be upheld.

Last year, the Morrison government reached a $1.2bn settlement with a class action over the robodebt scandal, agreeing to refund and compensate about 400,000 people over welfare debts that it later acknowledged were unlawful.

Under social security rules, welfare recipients must report their income to Centrelink on a fortnightly basis to determine how much they are paid. But the government used an average drawn from annual Australian Taxation Office pay data to accuse people of underreporting their income over two-week periods.

Related: Morrison's meagre jobseeker rise is a political fix that only tightens the screws on the unemployed | Rick Morton

While it promised to refund these debts, the government has refused to give up on other debts it says were substantiated with further evidence, such as fortnightly payslips or bank statements.

Late last year, Guardian Australia reported that the tribunal had found a $1,600 debt issued to one of Patrick’s constituents, which relied on such pay information, still had “not been proved”.

This week, Patrick confirmed two recent tribunal cases had cast further doubt on the practice.

Patrick called on the government to review all debts “calculated unlawfully using averaging of payslips and seek to establish the facts”.

“Two recent decisions of the AAT have confirmed that Services Australia can’t use payslip averaging,” he said.

“They have to use factual information to establish a debt and they can’t collect on a debt until they have done so.

“They can’t let debts based on fiction stand, and if they can’t properly establish the facts then they must waive the debts in their entirety. Too many of Australia’s most vulnerable have been adversely affected by all this and it’s time for the government to right its wrongs.”

The issue, as argued by Patrick, is that in some cases the payslips relied on by Services Australia to calculate welfare debts don’t align with the fortnightly income reporting periods.

In these situations, the agency creates a “daily” average where the reporting periods do not align. It is argued this is a similar use of “income averaging” to when Services Australia used yearly pay data and averaged it to a fortnightly figure.

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Patrick argues the process would create an inaccurate or even “unlawful” debt because averaged income was attributed to the wrong fortnight.

It is unclear how many debts have been issued in this way but Patrick has previously argued the government should fund a test case at the federal court.

If upheld, Patrick’s argument may affect some of the thousands of people who are being denied refunds under the robodebt settlement, mostly casual workers with “lumpy” income.

Services Australia has declined to respond to a Senate question on notice on the matter, saying it would be an “unreasonable diversion of agency resources”.

In the two new AAT decisions, viewed by Guardian Australia, the tribunal ordered the debts – worth about $3,000 and about $300 – be “set aside”.

In one case, the tribunal ruled that an overpayment “could only be calculated after obtaining evidence that allows an accurate and reliable determination of [the applicant’s] income during each instalment fortnight of the debt period”.

The second decision similarly found that the debt in question must be
“recalculated on the basis of earnings information ... listing [the applicant’s] daily income in the relevant Centrelink pay fortnights, so as her income can be correctly apportioned to the relevant Centrelink fortnights throughout the debt period”.

In both cases, the tribunal ordered that the debts could only be recalculated once the agency had obtained further evidence, such as timesheets.

Hank Jongen, Services Australia’s spokesman, said debts were now validated through a number of “proof points including payslips, information from a person’s employer, information from customers or bank statements”.

“The decision to refund debts relates only to those raised under the Income Compliance Program from 1 July 2015 using averaged ATO income data,” he said.

Related: Woman wins two-year battle with Centrelink after it demanded she pay back $27,000

“As of February 2021, 96% of eligible debts have been refunded or zeroed. The agency has worked thoroughly and methodically to identify debts eligible for a refund.

“This process included robust quality assurance measures to ensure the correct identification of relevant debts.”

Jongen said anyone who disagreed with a decision could ask for a review “at any time”.

Guardian Australia has previously reported that critics such as former AAT tribunal member Prof Terry Carney have argued the agency routinely failed to seek any or enough further clarifying information from employers when raising welfare debts.

The agency has also been accused in court documents of ignoring past AAT decisions questioning its methods, though the claims were not tested in court.

The federal court, which is yet to sign off on the robodebt settlement, is scheduled to hold further hearings in May.