The federal government continued to recover money from welfare recipients despite admitting its robodebt scheme was “legally insufficient,” in part because its IT systems were not up to scratch, the Commonwealth Ombudsman has found.
In its report into how Services Australia implemented changes to the robodebt scheme in 2019 and 2020, and the refunds process commenced last year, the Ombudsman found the government was not proactive enough in communicating with individuals, or in efforts to assist those who were automatically repaying an unlawful debt.
Ombudsman Michael Manthorpe criticised the department for continuing to recover debts raised unlawfully under roobodebt after it had begun the process of refunding these debts. This was in part because IT systems that was unable to properly organise the process.
The Online Compliance Intervention system, dubbed robodebt, was launched by the Coalition in 2016 and used an algorithm to average out a welfare recipient’s yearly income using data from the ATO and cross-matching this with income reported to Centrelink.
If a discrepancy was detected, a “please explain” notice was automatically issued to the individual, placing the onus on them to prove that they did not owe any money before a repayment notice was issued.
The system was found regularly to incorrectly match this data and produce inaccurate or non-existent debts.
The Ombudsman’s first report into the scheme in 2017 found systematic issues around fairness, transparency and usability.
In late 2019, the government announced it would no longer use the averaged ATO income data to raise a debt and would freeze repayments of debts issued in this way, admitting that there was “legally insufficient” grounds to do this.
In May last year, the government said it would refund repayments made on debts that were based wholly or partially on average ATO data.
Later that year, the government settled a class action lawsuit over robodebt for $1.2 billion, with $112 million of compensation to be paid to 400,000 victims.
The department undertook a “highly manual and non-prescriptive” approach to determining which debts would have to be refunded, the Ombudsman found, with its IT systems not providing any indicator of how each debt was raised, significantly slowing down the process.
“If Services Australia had recorded reliable system indicators to track what information was relied on to raise the debt, including whether a debt had been raised relying wholly or partially using averaged data, this would have reduced the intensive and manual nature of this process and reduced the adverse impact upon affected individuals,” Mr Manthorpe said.
And because the department did not know which debts should have been frozen and refunded, it continued to recover some debts after admitting many had been issued on “legally insufficient” grounds, the report said.
“We acknowledge that not all debts raised under the [robodebt] program relied wholly or partially on income averaging,” Mr Manthorpe said.
“However, in the absence of knowing which were and were not, we are concerned that Services Australia nevertheless continued to recover income averaged debts despite a high risk that many of those debts were ‘legally insufficient’.”
“There was a period of some months during which debt recovery action was continuing in relation to many debts which Services Australia knew had a high likelihood of being raised on ‘legally insufficient’ grounds.
“We consider this created a high degree of risk for Services Australia and unnecessary hardship for individuals affected, which was compounded by Services Australia’s knowledge that the identification process would be largely manual and therefore take some time to complete.”
A better approach would have been to pause all debt recovery on all income compliance debts, but Services Australia’s IT systems did not allow for this, the Ombudsman found.
The system was unable to isolate an individual’s income compliance debt from other debts that may have been raised, and when a repayment is made it isn’t to a particular debt due to the way the IT system is designed.
“Services Australia advised that because of this, it believed a freeze could not be implemented ‘en masse’ for all income compliance debts, because any individuals with non-income compliance debts would also have these debts frozen,” Mr Manthorpe said.
“If Services Australia wishes to maintain the ability to pause some debts and not others, we consider its systems should be designed to facilitate this approach.
“In our view, not being able to pause debt recovery action on all debts of a particular type, without slow and resource-intensive manual intervention, creates significant risk of inappropriate debt recovery action,” he said.
This process was also “exacerbated” by an absence of communication with people impacted by the changes between the 2019 and 2020 announcements, the report found.
The Ombudsman is also concerned that Services Australia did not have any plans to communicate with individuals who had a debt raised under the robodebt scheme and who were not eligible for a refund.
“We are concerned there may be a large number of individuals who are broadly aware of issues regarding the way Services Australia raised debts under the Income Compliance program, but do not know whether their particular debt is eligible for a refund,” the report said.
The Ombudsman said the department also hasn’t been “sufficiently transparent” that debts frozen or repaid may be raised again in the future.
The Ombudsman made nine recommendations to government, including that it should communicate with people deemed not eligible for a refund, to review the advice offered to staff, and to publish general information that the decision to refund a debt does not mean another debt won’t be raised for the same period using a different method.
The report offered seven further comments about Services Australia’s handling of the issue but that need no remedial action. This included that the agency should have recorded how the debts were raised, that it should have immediately frozen all debts after revealing they were “legally insufficient” and it should have “immediately” communicated with those impacted after the 2019 announcement.
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