Yahoo News Coalition told robodebt 'no longer viable' and should be abolished, leaked advice reveals
The federal government’s income compliance or robodebt scheme is “no longer viable or cost effective” and should be abolished, Services Australia has urged in leaked advice seen by the Guardian.
Stuart Robert, the government services minister, insisted on Friday the government would continue to pursue other income compliance debts but only after seeking legally sound evidence in the form of payslips from welfare recipients.
He described the decision to no longer issue debts raised using “income averaged” ATO pay data – which the government now acknowledges is unlawful – as a “refinement” and confirmed it would “continue its income compliance framework going forward”.
Related: Robodebt: government to refund 470,000 unlawful Centrelink debts worth $721m
But the Guardian can reveal that Services Australia told cabinet ministers in February the billion-dollar program was “no longer viable” and called for it to be scrapped.
Leaked government advice prepared for ministers Robert, Anne Ruston, and Christian Porter said the scheme should be abandoned, which would allow staff to more efficiently process refunds it had already privately acknowledged it would need to pay.
“The Income Compliance Programme is currently estimated to deliver $2.1bn in fiscal savings and $1.2bn in underlying cash over the forward estimates to 2023-24,” the agency said in the ministerial submission.
“However, the Programme is no longer viable or cost effective given legal advice about the use of averaged ATO income data.”
In a further blow to the scheme, Services Australia has privately acknowledged legal advice from the Australian Government Solicitor which argued it was “not possible to use bank account information, by itself, to raise debt”.
The agency had previously demanded bank statements from welfare recipients who said they could not obtain payslips from past employers, dating back six years.
It has continued this process after November, when it acknowledged that raising debts based purely on “income averaged” ATO pay data was unlawful.
Given that bank statements could not be used, compliance officers would have to spend more time seeking payslips from welfare recipients and employers, some of whom may no longer be in operation.
“Consequently it is uneconomic to continue the Programme,” the leaked advice said.
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On Friday, the government announced it would refund 470,000 debts, worth $720m, in the shadow of a federal court class action brought by Gordon Legal.
Gordon Legal, which is also pursuing the government over compensation and interest on repaid debts, on Friday vowed to continue to pursue compensation as well as interest on debts.
Guardian Australia understands the government has considered winding up the income compliance scheme, which would cost $700m over the forward estimates, but is yet to make a decision.
It can also be revealed the government is leaving the door open to once again pursue debts that it chooses to refund in the future.
A spokesman for Robert confirmed Services Australia would “zero” debts, rather than waiving them.
“Waiving a debt means that although a legally recoverable debt exists, Services Australia decides to forgo the right to recover that debt,” the spokesman said.
The proactive decision to announce refunds, made on Friday afternoon ahead of court-ordered mediation in June, was aimed at limiting the commonwealth’s liability for interest and legal costs.
Advice seen by the Guardian shows the decision to announce refunds ahead of the class action mediation was one of four options presented to government ministers by Services Australia.
These were to defend the class action in court, make a lump sum payment via Gordon Legal, seek to settle the case without announcing refunds, or to announce refunds and seek to settle the class action.
Services Australia told government ministers in February the decision to “proactively” refund debts would “reduce the incentive for the Applicants to persist with the class action, and minimise the commonwealth’s potential liability for interest and legal costs”.
The agency said the “proactive refund strategy” would show the government was not “waiting for the court process to dictate its actions. In light of the concession in the commonwealth’s defence, this can assist to temper criticism of the government’s actions.”
It came less than two weeks after Centrelink started sending out hundreds of thousands of “opt-out” class action notices under a federal court order.
James Naughton, a partner at Gordon Legal, said the federal court should sign off on the refunds process to ensure robodebt victims did not waive their rights to damages or interest on their refunds.
He said the firm’s clients did not find it reasonable that the government “having now conceded that it acted unlawfully, should unilaterally decide that it can take its time to pay it back”.
“Our clients will also want the government to explain to the court why it made this announcement without any consultation with them or the court and has chosen not to address their claims for damages for the distress and inconvenience or the interest they are entitled to receive because the government has had the benefit of their money unlawfully,” he said.
Robert’s spokesman said: “The Income Compliance Program is continuing, in line with the government’s commitment to uphold the integrity of Australia’s welfare system.
“Today’s announcement relates only to past debts raised wholly or partially using income averaging of ATO data. All repayments made on these debts will be refunded by Services Australia from July.”
Asked if the government would pay interest on the debts, the spokesman said: “Other aspects of the Income Compliance Program are still before the federal court. As such, it would be inappropriate to comment while these matters are still under active consideration.”
