Millions of Aussies could be owed money as Centrelink calls in ‘flawed’ debts

Centrelink is demanding almost 150,000 Australians repay debts that have been paused for years and were calculated using an averaging method that was later found to be unlawful.

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

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

Many of the debts date back to alleged overpayments on social security payments received more than a decade ago, prompting calls for Centrelink to wipe debts that are more than six years old.

Adelaide single mum Jodie, who asked for her surname to be withheld, said she was left bewildered and distressed when she got a letter from Centrelink last month, telling her she needed to repay two debts totalling $1550.

The debts relate to Newstart payments she received up to 12 years ago, while working casually and part-time between 2014 and 2018. 

The debts were first raised in 2019 and 2020, but were put on hold by Centrelink for six years, firstly due to the pandemic and then due to questions raised about the legality of income apportionment.

Jodie said she thought the debts had disappeared and were gone for good until she got the Centrelink letter last month. 

“These debts have just reappeared after six years. All of a sudden, they are hounding me to pay it. What the hell?” she told nine.com.au.

Jodie said she did not believe the debts were accurate, or that she owed any money to Centrelink at all.

“I always overestimated my income back then by $100 a fortnight, just so I wouldn’t get a debt,” she said.

Jodie disputed the debts when they were first raised, and a review conducted by Centrelink led to one of the debts being halved.

However, Jodie said she stopped fighting the debts when they were put on hold in April 2020, due to a nationwide pause on debts by Centrelink during the pandemic.

Now, she said she was left with the “impossible” task of trying to track down bank and payslips from more than a decade ago.

“How can I prove what my income was in 2014? This is a disgrace,” she said.

A spokesperson for Services Australia said Centrelink wrote to customers with income-apportioned debts “a number of times” to let them know about the pause, their review rights and options for voluntarily continuing debt repayments. 

However, Jodie said the letters were confusing and, as her debts were not showing on her online dashboard, she dismissed them.

Adding to Jodie’s bewilderment is the fact that she is also a Robodebt victim, as she was issued with a Robodebt of $4500 due to alleged Newstart overpayments during the same time period as her other debts.

Jodie’s Robodebt was among the 450,000 wiped by the Australian Government from 2020 after they were found to be unlawful and a massive class action lawsuit was launched.

“I don’t have any faith in Centrelink because of what they have put me through, and now they are doing it to me again,” she said.

Is it a Robodebt?

Jodie said she was initially confused about whether her other two debts were also Robodebts, until she had found the letters Centrelink sent her about income apportionment.

Income apportionment occurs when a person’s work income is averaged across two or more fortnightly Centrelink reporting periods.

It was the system Centrelink used for decades until December 2020, when dates from employer payslips did not match up with reporting dates.

Robodebts were debts raised during a narrower time period - between July 2015 and November 2019 - under the government’s so-called “income compliance program”. 

Robodebts were calculated using averaged yearly Australian Taxation Office income information. 

The Robodebt scheme was found to be unlawful in November 2019 through a landmark legal test case brought against the Commonwealth by Victoria Legal Aid.

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In a complex twist, some Robodebts were re-classified as income-apportioned debts after welfare recipients disputed them and provided payslips.

However, the revelations of Robodebt raised large questions about whether calculating debts with the income apportionment method was also unlawful.

In 2023, Centrelink paused all income-apportioned debts while it considered its options.

In 2025, a test case was identified and heard in the Federal Court. The case related to Matthew Chaplin, a Victorian plumber, whose income-apportioned debt dated back to income earned in 2014.

The Federal Court confirmed in July 2025 that there was an alternative method that could be used to calculate whether a person had a debt

However, instead of recalculating them, the Australian Government passed legislation in December 2025 to retrospectively validate all income-apportionment debts, allowing it to continue recovering those debts and keep the money people have already paid. 

The government also set up a compensation scheme for welfare recipients with income-apportioned debts, allowing them to claim up to $600 in reparations.

A High Court appeal of the Chaplin case confirmed that income apportionment was unlawful but that these debts could be recalculated using a different method.

Since June, Centrelink has been gradually unpausing these debts and sending “payment due” notices.

‘Confusion and distrust’

Miles Browne, Victoria Legal Aid’s Economic and Social Rights Acting Associate Director, said Jodie was not alone in her bewilderment and that his legal service had seen many clients coming to them in recent months expressing confusion and distrust.

“The experience of people with a Centrelink debt from that [Robodebt] period has just been awful,” he said.

“There is so much complexity around Centrelink’s debt raising and so many issues the government's encountered in terms of lawfulness that people just don't have any confidence that the debt they are paying off is correct,” he said.

Browne said he believed waiving all income-apportioned debts, as was done with Robodebt, would have been an appropriate response from the government.

“In our view, a waiver should have been contemplated and would have been appropriate given the debts had not been properly calculated,” he said.

“These debts were all very old, and in our experience, people were not only just confused, but had a lot of trouble finding the evidence to disprove the debts.”

Centrelink told to stop chasing old debts

Up 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.

After hearing evidence about the challenges experienced by welfare recipients in obtaining decade-old bank statements, the 2022-2023 Robodebt Royal Commission’s final report included a recommendation that the six-year time limit be reinstated.

Browne 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.

Millions could be owed compensation

The government set up the Income Apportionment Resolution Scheme in January this year, as a way of providing compensation to current and former welfare recipients who had debts raised against them which were calculated unlawfully.

The scheme offers one-off payments of up to $600 for each eligible debt affected by income apportionment.

However, Australians only have until January 29, 2027 to apply for the scheme.

Browne said that while Centrelink had been informing Australians with current income-apportioned debts about the compensation scheme, he was concerned many who had re-paid these debts in years past remained unaware of it.

“It’s our view that there may be up to three million Australians who have paid off a debt in the last 20 years to Centrelink, who could absolutely be eligible for a payment of up to $600 per debt to compensate them for the fact that the debt was unlikely to be calculated correctly in the first place. 

“But no-one's been told about it, and we're concerned people aren't taking it up.”

A Services Australia spokesperson said: “In January, we wrote to affected customers about the … resumption of repayments and to let them know they could apply for a compensation payment under the Income Apportionment Resolution Scheme.

“We encourage anyone who might have a debt impacted by income apportionment to apply for the Resolution Scheme.”

Contact reporter Emily McPherson at emcpherson@nine.com.au.