The federal government took years to pay back unlawful debts to vulnerable people, the royal commission into the Robodebt scheme has heard.
Deanna Amato, who successfully sued the federal government over Robodebt in 2019, fronted the inquiry on Friday.
Ms Amato had a $4,000 debt, allegedly related to a study support payment she received for six months in 2012.
She was joined by top lawyers from Victorian Legal Aid acting chief executive Rowan McRae and economic and social rights managing lawyer Miles Brown.
She said facing the Commonwealth in court was not easy, but she knew others had experienced worse hardship.
"I was very scared. It gave me a bit of anxiety. It wasn't an easy decision, but seeing the documents for myself, it seemed really obvious where the mistake happened and I just felt like I was in the right place to do it because it was just so obvious," Ms Amato told the inquiry.
Ms McRae said in 2017, Victorian Legal Aid saw a 500 per cent increase in the number of people accessing social security information on their webpage.
She said many people who connected with the legal service had reported they were not having rights of review recognised.
She said even after Ms Amato's case, it continued to be difficult for those with false debts to communicate with Centrelink or get their money back.
Ms McRae said many people gave up trying to disprove the debts because it became just too difficult.
"I think that's one of the most egregious aspects of the scheme, that ultimately people were paying the government money they didn't in fact owe and these were some of the most disadvantaged people potentially in Australia," she said.
"That was money that could have been used for other things, for groceries or health care or schoolbooks and the money was held on to for many months and in some cases years."
'Toxic' scheme 'kicked people while they were down'
Mr Brown spoke about people feeling "disempowered" by the government through a scheme that was "toxic for their wellbeing".
He said the design of the program was "patronising" and many clients struggled to understand the communication they received, let alone respond to it.
Mr Brown detailed the story of one client that had been subject to the scheme while homeless after fleeing a violent home.
"The only money she was receiving was from Centrelink payments [which] went towards food and medication," he explained.
"Then one day there was less money in her account. She thought it was a mistake. She spoke to Centrelink. She discovered that there was a debt that had been created, that she needed to go back to all her old employers, find those pay slips and it was impossible for her given the length of time that had passed.
"She said it felt like Centrelink was 'kicking me while I was down'."
Mr Brown said the woman described the situation as "the straw that broke the camel's back" when she was trying to find housing and mental health services.
He said she told him: "I was treated like a criminal. It felt like no one in government wanted to help me and instead I had to fight them in circumstances where I had no power, no control, and no ability to fight back".
Issues raised in 2017
Eminent legal mind Peter Hanks KC also gave evidence.
The inquiry heard Mr Hanks gave a presentation in 2017 to an administrative law conference that was attended by government lawyers, where he detailed his views that Robodebt was unlawful because it used income averaging.
The royal commission has previously heard no further legal advice was sought by senior bureaucrats in relation to the legality of the scheme until 2019.
He later was involved in legal challenges against the Commonwealth in relation to the debt recovery scheme.
Counsel assisting Justin Greggery KC asked Mr Hanks: "The idea of a challenge in the federal court to the legality of a debt recovery scheme, where did that originate from?"
"I think it might have originated with me," Mr Hanks replied.
Documents edited
Earlier, the inquiry heard cabinet documents detailing the proposal that became the illegal Robodebt scheme, did not mention the fact income averaging would be used.
Mark Withnell, an ex-Department of Human Services (DHS) general manager who was in charge of integrity at the department took the stand for a second time.
He was shown several documents that were sent to the then-Coalition government to approve Robodebt's early implementation.
"The new approach will not change how income is assessed or overpayments calculated," the documents explained.
Senior Counsel Assisting Angus Scott KC showed Mr Withnell a draft document of a new policy proposal to cabinet in 2015.
In edits to the document, the mention of income averaging had been removed, the inquiry heard.
Mr Withnell told the royal commission he believed at the time the policy had "moved away from the use of income averaging … to a different approach".
"Do you accept that if it was not the case that the proposal had moved away from the use of income averaging, this amendment that we've got on the screen here … was apt to mislead the reader of the document?" Mr Scott asked.
Mr Withnell replied: "Certainly, if there was still contemplation of using the ATO data as a basis for calculating overpayments, it would, in large part, be misleading, yes."
The inquiry was later shown versions of the document that went to cabinet, which did not mention the use of income averaging to calculate debts.
Mr Withnell told the inquiry he hoped there would have been more discussion about the details of the program before a ministerial brief detailing the "transformative" savings proposal was sent.
"I recall a lot of the time was spent on finessing the brief and the working of the brief and I would have preferred to spend more time about the robust discussion about the measures," he said.
'Chaotic atmosphere'
He also detailed to the royal commission the "chaotic atmosphere" in the department at the time the scheme was developed.
"At the time things were moving very fast," Mr Withnell said.
"There was a degree of anxiety … everything was very busy and very hectic."
Mr Withnell was later shown a series of emails from 2017, which were sent by him, where employment income matching (EIM) was discussed.
He said he had "no idea" what EIM stood for but agreed he had adopted the words in an email.
"Do you frequently send emails containing words where you haven't satisfied yourself that those words are accurate?" Mr Scott asked.
In response, Mr Withnell reiterated the chaos in the department at the time.
"Great numbers of people were going out on stress leave to be frank," he said.
The royal commission will continue hearings in Brisbane next week.
