Government to repay more than $700 million in wrongly issued 'robodebts'

The Federal Government will refund welfare recipients more than $700 million raised by its so-called "robodebt" system that issued almost half a million debt notices.

Services Australia said it had identified 470,000 debts raised "wholly or partially" from income averaging data and will start repaying these debts in July.

The total value of refunds – including fees and charges incurred – is estimated to be $721 million.

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Known officially as the "Income Compliance Program", the robodebt scheme worked by identifying mismatches in reported income between Centrelink and the Australian Tax Office.

Where customers were thought to have not responded or "fully engaged" with requests to clarify discrepancies between the two totals, a debt was issued automatically by the scheme.

People were automatically contacted if Centrelink thought they might owe more than $1000.

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One in five debt letters sent were based on false information.

Government Services Minister Stuart Robert said that from July 1 the government will be contacting 190,000 people whose details they have in order to start the repayments.

The remainder of those owed money – some 183,000 – will be contacted to update their details.

"The best advice we have is that raising that based on average income is not sufficient under the law wo we will return that money and move forward with our income compliance program," said Mr Robert.

"Australians don't need to do anything in terms of getting a refund."

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In a release the office for Minister for the National Disability Insurance Scheme Stuart Robert said steps will be taken now ensure people who have overpaid are refunded.

"Services Australia will now put in place the mechanisms needed to start making refunds, including how affected customers are advised of next steps," wrote Mr Robert's office.

"Consultation will occur with stakeholders, including the Commonwealth Ombudsman, and clear communication is a priority, so people understand what it means for them.

"It is important to note all other income compliance debts will continue to be subject to recovery, ensuring the integrity of Australia's welfare system."

Services Australia noted that it makes $180 billion in payments a year to recipients and that Australians "rightly expect the Government to be resolute custodians of these taxpayer funds".

"The Morrison Government takes its responsibility for upholding the integrity of Australia's welfare system seriously," it said in a statement.

The controversial system was ruled unlawful last year, with the Federal Court saying Centrelink could not have been satisfied the debt was correct.

The government wound back the scheme prior to the court decision in November 2019.

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