I was literally crushed. I was in shock. I walked around my house trying to deny the reality of what had happened. I was confused as to how I owed this amount of money. Within weeks I began receiving calls, texts and letters from a debt collection agency. I was told that Centrelink had the power to garnish my wages and keep my tax return. I was so ashamed at the time that I didn't know who to talk to about this.
1.1
The Income Compliance Program impacted hundreds of thousands of people and, for many, resulted in devastating emotional and psychological harm. It has undermined many people's financial security as well as their willingness to engage with and trust government services.
1.2
In total, an estimated $1.73 billion in illegitimate debts were raised against approximately 433 000 Australians. Within this group, approximately 381 000 individuals were pursued, often through private debt collection agencies, to repay almost $752 million to the Commonwealth.
1.3
The savings intended to be achieved by the program have not been realised. Government budget papers projected savings of approximately $2 billion from 1 July 2015 to 30 June 2019. During this period, Services Australia spent $606 million to implement the program.
1.4
The Government has committed to repaying $752 million in ‘debts raised wholly or partially using income averaging’ and to pay a further $112 million in restitutionary damages and legal costs. It has also agreed not to further demand, raise or recover debts based solely on income averaging.
1.5
In addition, significant heads of expense remain unknown. The cost of the Income Compliance Program for the period 2019–20 to 2023–24 is ‘not for publication due to ongoing legal proceedings.’ The Government has also refused to provide details of its legal costs related to the Income Compliance Program.
1.6
A troubling feature of the program has been the Government’s resistance to changing its approach in the face of unequivocal evidence that systemic issues were undermining the program and causing harm to people, during and after the end of the program.
1.7
Signs of systemic failures became apparent soon after the transition to online systems in July 2016. A large number of complaints caused the Commonwealth Ombudsman (Ombudsman) to establish an own motion investigation on 10 January 2017. Growing public evidence of the disruption and impact to individual’s lives led the Senate to establish its first inquiry into the Income Compliance Program on 8 February 2017.
1.8
In August 2019, Services Australia told the committee that $2 billion in overpayments were ‘owed to the taxpayer’ and that the department was ‘actively seeking to recover’ these supposed debts. Only three months later, the Federal Court of Australia confirmed that the Government had no legal basis for pursuing these debts. Although the Government ‘paused’ the collection of debts on 19 November 2019, debts based on income averaging were not cancelled until 29 May 2020.
1.9
This inquiry has sought to understand how and why hundreds of thousands of Australians were wrongly pursued for debts over a three-year period, as well as the Government’s knowledge of the legality of the Income Compliance Program. Questions remain about why the Government continued to rely on income averaging despite it being inadequate as a method for determining the existence of a debt; why this practice only ended after the intervention of the courts; when did the Government become aware that the program was not legally sound; and why did the Government persist with the program despite mounting evidence it was causing real and significant harm.
1.10
Answers to these, and many other, questions are crucial so that current, past and future recipients of income support can have confidence that the errors of the Income Compliance Program will not be repeated.
The Income Compliance Program
1.11
Income compliance is a process in which discrepancies are identified between the amount of income support paid to a person and the amount they are eligible to receive. If an income support recipient receives more money than they are eligible for, Services Australia may recover these overpayments, which are treated as debts owed to the Commonwealth.
1.12
The Income Compliance Program was established as an expense measure in the 2015–16 Budget. The program was announced by the former Social Services Minister, the Hon Scott Morrison MP, on 12 May 2015. Several ministers have had responsibility for relevant portfolios during the life of the program.
1.13
Under the Income Compliance Program, Services Australia used automated processes to recover debts from income support recipients who were erroneously asserted to have received more money than they were entitled to. The program was flawed because it was based on an assumption that averaged income data from the Australian Tax Office was sufficient to determine the existence of a debt where other information was not available, or people did not provide information to demonstrate the non-existence of a debt. This reverse onus of proof on Australian citizens was a significant change of policy under the direction of Social Services ministers.
1.14
Prior to the establishment of the Income Compliance Program, income averaging would only be used after ‘every possible means of obtaining the actual income information’ had been attempted and failed. The department would use its authority to gather information from employers to inform a careful assessment of potential debt. Where information was not available, a compliance officer would manually calculate debts using averaged income data.
1.15
In July 2016, automated processes replaced manual assessment and verification of debts and were subsequently dubbed ‘Robodebt’. The move to automated systems enabled Services Australia to process around 20 000 compliance interventions per week, where this would previously have taken an entire year.
1.16
Rather than researching the potential debt themselves, the department simply raised the debt, sent the notices and required citizens to prove their innocence, sometimes requiring them to go back seven to ten years and obtain copies of records of payments. This was made especially difficult if the person had changed employers, if their former employer had closed their business or if they were no longer a customer of the same bank. Many witnesses just gave up and paid debts they did not owe rather than face the challenge of reconstructing a detailed record of payments from more than a decade before.
1.17
The following table provides an overview of key events related to the Income Compliance Program:
Table 1.1: Key events related to the Income Compliance Program
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20 December 1992
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Introduction of data matching and income averaging processes to help identify potential social security overpayments.
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1 July 2015
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Establishment of the Income Compliance Program.
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July 2016
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Delivery of the Income Compliance Program ‘through online systems’ commences with the ‘Online Compliance Intervention’.
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7 April 2017
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Report by the Ombudsman on Centrelink’s automated debt raising and recovery system makes eight recommendations to address problems identified with the Income Compliance Program.
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21 June 2017
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The Senate Community Affairs References Committee (the committee) recommends that the Income Compliance Program is put on hold.
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3 April 2019
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Implementation report by the Ombudsman notes that all but one of the recommendations of its 2017 report have been implemented and makes a further four recommendations.
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20 September 2019
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Services Australia confirms that from 1 July 2015, it had completed 1 million reviews of discrepancies, finding 734 000 overpayments with a total value of around $2 billion.
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19 November 2019
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The Government announces that it will no longer rely solely on averaged income data to raise debts and that recovery of debts calculated on this basis would be paused.
Gordon Legal initiates a class action against the government in relation to the Income Compliance Program.
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27 November 2019
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The court in Deanna Amato v The Commonwealth of Australia declares by consent that averaged income data is insufficient to establish the existence of a debt.
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29 May 2020
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The Government announces that over 470 000 debts made under the scheme were ‘insufficient under law’ and that these debts would be repaid or reduced to zero.
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16 November 2020
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The Government agrees to settle the class action.
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11 June 2021
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The Federal Court of Australia approves the class action settlement agreement, including the Settlement Distribution Scheme Implementation Plan.
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Conduct of the inquiry
1.18
On 31 July 2019, the Senate referred this inquiry to the committee for reporting by 4 December 2019. The committee has been granted several extensions of time to report. On 23 November 2021, the Senate granted a further extension of time for reporting until the last sitting day in May 2022.
1.19
The inquiry was advertised on the committee’s website and the committee wrote to stakeholders inviting them to make submissions, to be lodged by 17 September 2020. Submissions continued to be accepted after this date. The committee received 78 submissions which are listed at Appendix 2.
1.20
The committee held 10 public hearings:
3 October 2019, Canberra, ACT
4 October 2019, Mandurah, WA
9 October 2019, Melbourne, VIC
8 November 2019, Launceston, TAS
16 December 2019, Canberra, ACT
31 July 2020, Canberra, ACT
17 August 2020, Canberra, ACT
29 March 2021, Canberra, ACT
19 August 2021, Canberra, ACT
27 August 2021, Canberra, ACT
1.21
The committee has tabled five interim reports during the course of the inquiry:
The second interim report (September 2020) is a substantive report about the operation of the Income Compliance Program and its impacts.
The first (February 2020), third (September 2020) and fourth (August 2021) interim reports consider claims by the Government to withhold information on the basis that release of the information and documents could result in harm to the public interest (referred to as public interest immunity claims or PII claims).
The fifth interim report (November 2021) examines the effect of the PII claims on committee processes and related issues of transparency and public trust in government services.
1.22
A summary of the committee’s previous recommendations in this inquiry is provided at Appendix 1.
Report structure
1.23
This is the committee’s final report for this inquiry.
1.24
This introductory chapter provides an overview of the Income Compliance Program and a summary of key events. The report consists of one further chapter which outlines the significant impact of the Income Compliance Program on current and past income support recipients, and the current position of claims made by the Government in support of withholding information from this inquiry.
Notes on terminology
1.25
References in this report to Centrelink should be taken to include Services Australia (formerly the Department of Human Services) as the agency responsible for administering Centrelink services.
1.26
Consistent with previous reports, the committee has chosen to use the term ‘Income Compliance Program’ as this is the formal name of Centrelink’s compliance program. The committee acknowledges that the program is often referred to as ‘Robodebt’ by those impacted by the program, members of the public, the media, and in court documents and academic discourse.
Acknowledgements
1.27
The committee thanks all those who provided submissions and gave evidence to this inquiry. The committee especially wishes to acknowledge the bravery of those who told the committee about their own experiences of the program, and the distress they may have experienced in doing so.
1.28
The committee was deeply moved by these personal stories and the strong desire of those who experienced hardships due to the Income Compliance Program to ensure that their stories were heard and that a program like this should not be implemented ever again.