The federal government has abandoned the “two worst parts” of robo-debt as part of a major back-down on the controversial scheme.
Under the changes, Centrelink will no longer issue debts when the only evidence it is relying on is the averaging of income data provided by the Australian Taxation Office.
It also no longer require welfare recipients to explain when a discrepancy appears – putting the onus on the client – and will instead undertake its own inquiry to determine if a debt is owed.
The significant policy reversal comes as the robo-debt scheme faces two significant legal challenges, with a class action lawsuit and a test case to be heard in the Federal Court in two weeks’ time.
The major overhaul was revealed in an internal email sent to Human Services compliance staff on Tuesday, and confirmed by Government Services Minister Stuart Robert.
“The Department will no longer raise a debt where the only information we are relying on is our own averaging of ATO income data,” the Department of Human Services said in a statement.
“This is in line with our ongoing commitment to continually strengthen and improve our service delivery. We will work through all previous online compliance debts to determine those which did not use other information,” it said.
“As these cases are identified, the debts will be frozen while we look more closely at them. People do not have to do anything for this to happen. We will write to people to advise we have stopped recovery activity if they are affected.”
The two components are major elements of Centrelink’s highly controversial Online Compliance Intervention, which was launched by the Coalition in July 2016.
The scheme uses an algorithm to average out welfare recipient’s yearly income using data supplied by the ATO, and cross-matches this with income reported to Centrelink.
If the system finds a discrepancy, it automatically sends out a please explain letter to the welfare recipient. But the system has been found to regularly miscalculate debts and produce incorrect or non-existent debts.
Of the about 800,000 income compliance notices issued since July 2016, about 20 per cent have not resulted in a debt being raised.
The major changes were announced just two weeks before the robo-debt scheme is set to be challenged in a Federal Court case brought by Victorian Legal Aid, with the scheme also facing a significant class action lawsuit led by Gordon Legal and backed by the federal Opposition.
In a tweet, Victorian Legal Aid said the “two worst parts of robo-debt” have now been abandoned.
Addressing the media on Tuesday afternoon, Mr Robert attempted to downplay the significance of the changes, claiming that only a “small cohort” have had debts raised only based on income averaging, and that the adjustments are merely “refinements”.
“I’ve asked my department to identify the small cohort of Australians who have debt raised solely on the basis of income averaging, so we can commence discussions with them and seek further points of proof,” Mr Robert said.
“There is no change to the construct of the onus of proof. We’ll continue to use income averaging, with other proof points, as the basis to identify the possibility of a debt.”
Shadow government services minister Bill Shorten said the government has “hit the emergency brakes on this scheme”.
“They’re junking the reverse onus of proof where victims have to prove they don’t owe the debts. That means robo-debt is being taken to the wrecker’s yard,” Mr Shorten said.
“Other changes signify the regime going forward will not be robo-debt as we know it. What a shame such a large light needed to be put on this scheme before this stonewalling government decided to do the right thing.”
A class action lawsuit was recently launched against robo-debt, with the case arguing that the government’s use of an “imperfect computer algorithm” to issue debts is illegal. Victoria Legal Aid has also launched two test cases challenging the legality of the scheme in the Federal Court.
Both complainants involved in the cases have had their debts wiped by Centrelink after the legal challenges were brought forward. The second case is set to be heard in two weeks.