As many as 100,000 welfare debts were miscalculated by two federal government departments between 2003 and 2020.
Services Australia’s and the Department of Social Services’ "income apportionment" practices misinterpreted and unlawfully applied the Social Security Act from at least 2003 until December 7, 2020, when the law changed, the commonwealth ombudsman said.
This resulted in some Centrelink customers’ employment income being assessed in the wrong fortnight and potentially affected a significant number of Centrelink payments made before December 7, 2020.
The ombudsman found Services Australia paused its review of about 13,000 debts while it obtained legal advice and identified about 87,000 other files that might have been affected by the unlawful or incorrect "income apportionment" calculations.
Social Services Minister Amanda Rishworth and Government Services Minister Bill Shorten said in a joint statement it was a serious and complex matter, noting the system under investigation had not been used to calculate social security payments since July 2021.
They said there could be potential debts or overpayments that remain unresolved.
The ministers said they agreed with the ombudsman’s findings the issue had taken too long to resolve and needed to be settled as quickly as possible.
The government has directed the Department of Social Services and Services Australia to resolve outstanding legal issues on the matter as a priority.
Ms Rishworth has asked for an update by the end of the month.
Ombudsman Iain Anderson said in his report released on Wednesday the situation differed from the robodebt system, which used an unlawful system of income averaging.
“This issue may draw comparisons to robodebt because it involves the calculation of income which may lead to debts," he said.
"However, the income apportionment issue we investigated is not related to robodebt.
"I am satisfied that, unlike the robodebt scheme - which was initiated and continued without legislative changes the agencies knew were required - the incorrect and unlawful use of income apportionment arose due to the agencies genuinely holding an incorrect understanding of relevant legislative provisions.”
The ombudsman found Services Australia and the Department of Social Services "generally took appropriate steps to approach legal counsel but could have acted more quickly to finalise the resulting advice".
There was also a "significant difference in legal opinion" that still needed to be resolved, he said.
Services Australia and the Department of Social Services, which reported the issue to the ombudsman in February, have accepted or partially accepted four recommendations and a suggestion for reform.
