‘Just abusive’: More Aussies hit as Centrelink revives zombie debts after six-year pause

Exclusive: More Australians have come forward to share their distress after Centrelink suddenly unpaused historical debts that had been frozen for more than half a decade.

The renewed backlash comes after nine.com.au reported earlier this week that Services Australia is pursuing about 147,000 Australians over debts calculated using an averaging method that was later found to be unlawful.

The averaging method is called “income apportionment” and was used to tally up an estimated three million debts for alleged welfare overpayments totalling $4.4 billion over a period of decades, from the late 1990s to 2020. 

Millions of Australians repaid the debts, but about 147,000 are still marked as money owed in the system, and Centrelink is now calling them in. 

The outstanding debts were originally shelved during the pandemic in 2020, and then in 2023 as questions about their legality were assessed.

But after retrospective legislation was passed to validate the sums, repayments have quietly resumed, resurrecting years-old financial trauma for recipients who believed the nightmare was behind them.

Earlier this week, Adelaide single mother Jodie, who asked for her surname to be redacted, said she received a letter from Centrelink last month, demanding she repay $1550 for debts dating back as far as 2014. 

Having already been on the receiving end of an unlawful Robodebt of $4500, which was subsequently wiped alongside 450,000 nationwide, Jodie said she had “no faith in Centrelink”.

Now, others have stepped forward to describe the heavy toll of having old debts revived in the middle of a cost-of-living crisis.

‘How is anyone expected to live?’

Nicole, a 57-year-old single woman who asked for her surname to be withheld, first received a Centrelink debt notice for just over $9000 back in 2017.

The debt stemmed from alleged overpayments of the Newstart allowance between 2013 and 2016 while she was working as a casual university tutor.

Nicole immediately disputed the calculation, but after an internal review, Centrelink reduced the total by just $13.

“I received a stack of paperwork with years of sums, and there's no way I knew what to do with it or how to combat the problem. I couldn't afford a taxation agent to go through it all, so I just accepted it as I had no recourse,” she said.

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Nicole managed to pay off about $2000 before recovery action was frozen in 2020. The debt remained on pause for six years.

Like many caught in the system, Nicole initially assumed her debt was part of the notorious Robodebt scheme until she attempted to join the class action, only to be informed it was an income-apportioned debt.

Unlike Robodebts, which were calculated using yearly tax office information, income apportionment occurred when a person’s work income was averaged across two or more fortnightly Centrelink reporting periods.

In some cases, Centrelink re-classified Robodebts as income-apportioned debts after recipients disputed them and supplied employer payslips.

It is not clear if this is the case with Nicole’s debt.

Now unemployed, Nicole said she was shocked to learn a few months ago that her debt had been unpaused, with Centrelink initially seeking repayments of $140 a fortnight.

“It's disgusting! And the repayment minimums? Wow! How is anyone expected to live week to week when they want close to $150 repayment per fortnight? That's just abusive,” she said.

Nicole said she felt everyday Australians were now being forced to pay the price for the department’s administrative failures.

Even if the debt was correct, her ability to re-pay it had reduced significantly over the last decade, Nicole said.

A Services Australia spokesman said Centrelink had written to customers with paused debts “a number of times” to let them know about the pause, their review rights and options for voluntarily continuing debt repayments. 

“Now that legislation has passed to validate the use of income apportionment, we’re progressively restarting repayments for paused debts,” the spokesman said.

The government has set up an Income Apportionment Resolution Scheme, where Australians with income-apportioned debts can claim up to $600 in compensation, in recognition that their debts were raised using an unlawful method.

“In January, we wrote to affected customers about the change, the resumption of repayments and to let them know they could apply for a compensation payment,” the spokesman said.

“If a customer thinks their debt is incorrect or they disagree, we encourage them to ask us for an explanation or review and we include information about this in our debt letters.”

‘Centrelink doesn’t care’

Like Jodie and Nicole, the sudden restart of debt collection also came as a stressful and unwelcome shock to James*.

He was hit with a $17,000 income-apportioned debt in 2018. Despite believing the figures were incorrect, James said he felt like he had little choice but to start paying it off, clearing roughly $10,000 before repayments were halted in 2020.

Because the file remained paused for so long, James assumed the remaining balance had been wiped clean. That changed in July, when Centrelink contacted him to advise that recovery had resumed on the outstanding $7000.

James is now living on a carer’s pension, and said making any repayments would push him to the brink.

“Centrelink doesn’t … care about people struggling in this dire environment we live in,” James said.

Advocates and legal aid bodies continue to call on the federal government to waive historical welfare debts that rely on outdated records and discredited apportionment practices.

Until 2017 Centrelink was only able to pursue debts that were less than six years old. 

However, this limitation was removed in 2017, allowing the department’s debt raisers to go even further back.

The 2022-23 Robodebt royal commission’s final report included a recommendation that the six-year time limit be reinstated.

Miles Browne, Victoria Legal Aid’s Economic and Social Rights Acting Associate Director, said it was a call to action which Victoria Legal Aid strongly supported.

“Centrelink is able to raise and pursue historic social security debts as far back as it likes, but people just don’t have the evidence they need many years later,” Victoria Legal Aid has said previously in a statement.

“We strongly support introducing a six-year limitation period, as recommended by the Robodebt Royal Commission.” 

A spokesperson for the Department of Social Services said the government had “accepted-in-principle” the recommendation.

“We will continue to explore our options to implement this recommendation,” the spokesperson said.

* Name has been changed.

Do you have a story? Contact reporter Emily McPherson at emcpherson@nine.com.au.