Two people were jailed – one of whom remains in prison – after Centrelink used unlawful calculations to accuse them of overclaiming welfare benefits, a watchdog has revealed.
On Monday the ombudsman released its second report on the income apportionment method, calling on Services Australia to waive 100,000 debts that may have been incorrectly calculated and revealing the “traumatic” impact on those convicted of offences related to welfare debt.
The ombudsman explained that welfare recipients “could potentially be over- or underpaid under the law” depending on how their employment income was apportioned into fortnights used to calculate Centrelink payments.
“This may have led Services Australia to raise social security debts, or refer customers for criminal prosecution for alleged fraud or obtaining financial advantage, based on unlawfully calculated social security payments,” it said.
“Services Australia has since advised the [commonwealth director of public prosecutions] made it aware in mid-November 2023 that there were two people convicted for matters involving income apportionment who remain subject to current custodial sentences.”
The department of social services did not respond to a request for comment before publication, but subsequently said “only one person remains in jail for matters involving income apportionment”.
“At the date of the Ombudsman’s report it was correct, however, now one person has been released from jail.”
In August the ombudsman found that from at least 2003 to December 2020 the agencies miscalculated debts due to an “incorrect” understanding of social security law.
The problem has resulted in dozens of criminal prosecutions first being paused then dropped. Obtaining financial advantage is punishable by up to a year in prison.
The final report noted that “the existence of a social security debt can have direct and indirect negative impacts on a person” including criminal prosecution “which is traumatic in itself, and in the event of a conviction have serious consequences and repercussions for individuals”.
The department of social services said: “No one has been subject to a custodial sentence because of income apportionment. People are given custodial sentences because of the criminality of their offending.
“Prosecutions are very serious and where they result in a custodial sentence this is because the nature of the offending is so significant.”
The department of social services said income apportionment “may affect the quantum of financial advantage obtained” but not an alleged failure to correctly declare income in order to receive welfare “they knew or believed that they were not entitled to receive”.
Nothing is known about the circumstances of the two people potentially wrongfully convicted on the basis of incorrect debt calculations. A spokesperson for the CDPP said it “cannot comment on individual prosecutions”.
“The two people referred to … have been notified that their offences related to an overpayment of social security payment and the amount of that overpayment was calculated by Services Australia,” the spokesperson said.
“They were further informed that the CDPP has been informed by Services Australia that the method of calculation of the overpayment in their matter was incorrect as the income was apportioned across fortnights and not in accordance with the relevant legislation.”
The CDPP notified their legal representatives and legal aid, but said it “is a matter for each person to obtain legal advice” about what to do next.
“We will continue to review our disclosure obligations in light of any advice received from Services Australia.”
The University of Sydney welfare law academic Dr Chris Rudge said the CDPP’s response so far is “not really good enough if someone is in jail”.
“If someone is convicted on the basis of evidence now known to be erroneous, then surely there should be a facilitation of a review of their circumstances,” he told Guardian Australia.
“They should facilitate appeals … these are probably wrongful convictions.”
Rudge said that accurate calculation of debts is “absolutely fundamental” to the relevant offences, and use of unlawful income apportionment would therefore be a basis for convictions to be quashed.
“If [they’re] screwing up the amount, you might not have a debt at all. You couldn’t have knowledge of an overpayment if there is no overpayment.”
On Monday the social services minister, Amanda Rishworth, said income apportionment was a “complex” issue that had affected debts over a 20- to 30-year period, but had been stopped in 2020.
Rishworth told reporters in Canberra she had asked the department to “settle the outstanding legal advice” about calculation of debts.
“I want to see this issue resolved as quickly as possible. It’s a historic issue. It’s one where there are still some legal questions but I am seeking the resolution of this as quickly as possible.”
Guardian Australia contacted Services Australia and the Department of Social Services for comment.
• The headline and text of this article were amended on 8 December 2023 to take account of the post-publication response from Services Australia.
