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Government Scraps Major Part Of Robodebt System Affecting Thousands

The controversial robodebt system is ‘being taken to the wreckers yard’ in a radical overhaul to the scheme, with the human services minister confirming the changes.

The federal government system, which has issued more than one million debt notices to Australians to repay money for alleged welfare overpayments, will no longer use the controversial practice of income averaging to calculate debts.

It has been demonstrated that this method has led to debts being improperly raised for people who do not work consistent hours over the year, such as students, the semi-retired or those in seasonal industries.

These workers may earn a large amount one week and nothing in another week.

Welfare advocates have slammed income averaging -- which sees the system assume that a worker can earn the same amount every week -- as they say it can lead to people being told to pay back welfare payments they are legitimately entitled to.

According to the federal government, up to one in five robodebt notices, which can see welfare recipients pursued by debt collectors, may be incorrect.

The system is the subject of a class-action lawsuit and a federal court challenge, as legal advocates seek to test the system's lawfulness.

Victorian Legal Aid launched a federal court challenge in February, based specifically on whether the income averaging component was legal.

The robodebt system, targeting Centrelink clients, is changing. Image: AAP.

On Tuesday, the Department of Human Services reportedly told its employees in an internal email that it would now "require additional proof when using income averaging" to raise debts.

"This means the department will no longer raise a debt where the only information we are relying on is our own averaging of Australia Taxation Office income data," the email -- first reported by ABC News -- said.

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Minister for Human Services Stuart Robert has confirmed the changes to the system.

"The requirement that my department started this morning is to ensure that before a debt is finally raised, income averaging plus other points of proof will be used as the basis for that," he said.

"To ensure fairness and consistency for income compliance across all Australians, I've also asked my department to come back and identify the small cohort of Australians who have a debt raised solely on the basis of income averaging, so that we can commence discussions with them and seek further points of proof."

Stuart Robert has played down the changes as only affecting "a small cohort". Image: AAP

Robert said the Department of Human Services would "reach out" to people affected, but did not detail what effect -- if any -- the policy change would have on those who had already paid a debt they had been lumped with.

"We'll use other proof points as well, and we will ask them to engage with the department to identify through bank statements or through payslips or other means, that indeed, they don't have a debt," the minister said.

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Rowan McRae, Victorian Legal Aid's executive director of civil justice access and equity, said the announcement was welcomed.

Robodebt is so clearly flawed and has caused hardship to hundreds of thousands of Australians, including some of the most disadvantaged members of our community.

"We are pleased that the worst elements of robodebt will be scrapped."

Up to one-fifth of debt notices were found to be incorrect. Image: Getty

Bill Shorten, Labor's shadow minister for government services, claimed the announcement was an admission that robodebt was flawed.

"Robodebt is being taken to the wreckers yard," Shorten said.

"If the system is dodgy enough it needs to be junked, then what happens to all those people who have already been victims of robodebt?

"What happens to the money obtained improperly by the Commonwealth?" he asked.

Shadow Minister for Government Services Bill Shorten and Gordon Legal Senior Partner Peter Gordon at a press conference announcing a class action into robodebt. Image: AAP.

Greens spokeswoman Rachel Siewert said the changes were "long overdue".

"This program has hurt thousands and thousands of people," she claimed.

"We need more information about what this will mean for those who already have debts raised or who have already paid them or are on a payment plan. I call on the minister to be transparent about these changes."