The federal government has admitted defeat in a major legal challenge against robo-debt, conceding that a debt raised through the highly controversial program was unlawful.
Victorian Legal Aid brought the case to the Federal Court on behalf of Deanna Amato, who had a $2,754 robo-debt raised against her after the controversial system used income averaging with data from the Australian Taxation Office.
Ms Amato wasn’t aware of the debt until she had her $1709 tax return taken in full, as Centrelink had sent letters to an old address.
In September, with the court action approaching, Centrelink wiped the debt but the case still went ahead.
With a hearing set for next week, the federal government has now conceded that the way the original debt was raised was unlawful, and that adding a penalty to it and garnishing Ms Amato’s tax return was also against the law.
The Federal Court then made orders on Wednesday, with the government agreeing to refund the tax return, pay $92 interest on this and pay for Victorian Legal Aid’s legal fees.
Justice Jennier Davies concluded that the court “could not have been satisfied that a debt was owed in the amount of the alleged debt”.
The government has now accepted that many elements of robo-debt are illegal, Victorian Legal Aid executive director of Civil Justice Access and Equity Rowan McRae said.
“The Australian government has conceded that the unfair and inaccurate income-averaging process used to calculate Deanna’s robo-debt was also unlawful,” Mr McRae said.
“Deanna’s case has helped to clarify the unlawfulness of the robo-debt system for hundreds of thousands of Australians in the same situation, who received or paid off a robo-debt based only on averaging,” he said.
“Today’s result shows the Australian government has accepted what advocates have been saying for years – using only income averaging to raise debts is both inaccurate and inconsistent with the Social Security Act.”
Ms Amato said the result is “amazing”.
“You can feel so small and helpless next to the government, but I am so glad that the unfair and ultimately unlawful aspects of this system have been brought to light. My robo-debt should never have occurred in the first place,” she said.
“I feel pleased to have won my case, but it’s bittersweet to know so many people have paid money under this system. I think it’s important that people remember that they have legal rights to question decisions that get made about them.
“It was incredibly hard to decide to take on the federal government with this case, but my hope was always that the system would change, and others wouldn’t have to go through this process. I couldn’t be happier that we achieved this.”
The major legal loss comes just a week after the Department of Human Services abandoned two key pillars of robo-debt in a significant policy reversal.
Government services minister Stuart Robert confirmed that Centrelink would no longer be issuing robo-debts when the only evidence is relying on the averaging of income data provided by the ATO, and would also not be requiring welfare recipients to prove that a debt doesn’t exist.
Robo-debt is also facing further legal action in the form of a class action lawsuit being run by Gordon Legal and backed by the federal Opposition, with the writ filed last week.
Labor government services spokesman Bill Shorten said Deanna was not the only Australia to be targeted unjustly by robo-debt and that government should now be looking to contact others and refund debts that are found to be unjust.
“The Government owes its citizens the courtesy of explaining how those people will be contacted and paid back,” Mr Shorten said.
“Minister Stuart Robert last week hit the emergency breaks on the robodebt scheme but cynically downplayed it as ‘a refinement’,” he said.
“He now also needs to be transparent and honest about the number of Australians affected by his illegal scheme instead of misleadingly calling it a ‘small cohort’.”