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Laurie Clarke

Reporter

Australia to refund $720m in Centrelink ‘debts’ calculated by unlawful algorithm

The Australian government has announced it will refund $720 million (£391m) to the almost 400,000 welfare recipients who were unjustly saddled with debt by a faulty algorithm. Run by Centrelink (the government’s agency for delivering social service benefits), the automated welfare system, nicknamed ‘robodebt’, pitted welfare recipients against a Kafkaesque bureaucratic machine intent on wrongfully extorting them of cash. 

Thousands of benefits claimants were told they owed the government up to tens of thousands of dollars due to over-claiming welfare subsidies. However, in many cases these ‘debts’ were incorrectly determined. They were based on the recipient’s average income for the entire year, instead of how much they were earning during the period in which they qualified for benefits. 

The robodebt system, launched in 2016, used Australian Taxation Office data matched to Centrelink records, and an algorithm, to ascertain where welfare payments had been too high. It was hailed as a way to “crack down on dole bludgers and welfare rorters”, and recoup “billions” in over-compensation. “Our aim is to ensure that people get what they are entitled to—no more and no less,” a government press release read at the time. “And to crack down hard when people deliberately defraud the system.” 

Humans had previously checked the discrepancies between income and welfare cheques on a case-by-case basis. But in 2016, the system was entirely automated. Welfare recipients simply received letters in the post claiming they owed money and had to pay it. If Australians wanted to object, the onus was on them to collect together all of their paycheques for the last several years in order to prove the system wrong. In one person’s case, questioning the illegitimate debt resulted in the sum being increased from $20,000 to $30,000

The task of recouping these debts was often outsourced to private debt collectors, which hounded people mercilessly about signing up to repayment plans, as well as threatening deductions from their salaries. Australians labelled as debtors by Centrelink were not allowed to leave Australia, unless they had either paid off the entire debt or agreed to a repayment plan. 

Where the human-ran system had issued 20,000 letters per year, the new system sent 20,000 per week in its early days. However, one in five letters sent were based on false information. After about six months of being in operation, the veracity of the debts began to be called into question. Centrelink staff were inundated with complaints about the system – twenty-nine million calls to Centrelink went unanswered in 2016

A number of deaths have been attributed in part to the stress caused by the erroneous debt notices. A third of the 2000 people who died after being given a debt notice between July 2016 and October 2018 were classed as ‘vulnerable’, meaning they had complex needs in areas such as mental health, addiction problems, or domestic abuse. 

The government was warned about problems with the robodebt system in 2017, when a senior member of the Administrative Appeals Tribunal ruled five times that debts recouped under the scheme were not lawful. The system as a whole was deemed unlawful last year, with the Federal Court judging that Centrelink could not have been satisfied that the charges were correct. 

An ongoing class action lawsuit by more than 13,000 Australians could see the government charged additional costs in damages and interest beyond the $720m refund.