Up to 100,000 debts or potential debts were incorrectly calculated over two decades by “unlawfully apportioning” welfare recipients’ income, the commonwealth ombudsman has found.
On Wednesday the ombudsman released a report finding that from at least 2003 to December 2020 the department of social services and Services Australia miscalculated debts due to an “incorrect” understanding of social security law.
However, the ombudsman, Iain Anderson, said that this was result of a “genuinely” held belief their method was accurate, unlike the robodebt scandal which was “initiated and continued without legislative changes the agencies knew were required”.
Guardian Australia first reported the issue in November 2020 after complaints from then senator Rex Patrick based on a finding of the administrative appeals tribunal that a $1,600 debt issued to one of his constituents had “not been proved”.
In some cases the payslips relied on by Services Australia to calculate welfare debts don’t align with the fortnightly income reporting periods. In these situations, the agency creates a “daily” average.
The ombudsman found that under the process of “apportionment”, welfare recipients’ employment income was spread across two or more fortnightly periods, which are used to calculate entitlement to Centrelink payments such as jobseeker.
“This was not permitted by section 1037B of the Social Security Act as it was in force prior to 7 December 2020,” the report said.
“Apportioning income across multiple Centrelink fortnights caused problems with calculations, as customers could be over- or under-paid if employment income were apportioned into Centrelink fortnights when it was not earned, derived or received.”
Anderson said the practice is “not related” to robodebt, in which recipients’ annual income was averaged across 26 fortnights.
“The robodebt calculation methodology frequently switched the burden of proof away from Centrelink to prove a debt existed, and onto the customer to prove a debt did not exist,” the report said.
The report concluded that apportionment “likely affected social security payment rates and may have [led] to unfair debts against customers”.
The DSS and Services Australia took steps to get legal advice in October 2020 but “could have acted quicker to finalise advice”.
It is still unclear how many debts are affected. Services Australia paused about 13,000 debt reviews and another 87,000 files may also be affected.
“Whilst technically different to robodebt the effect it had on those who received debt notices was the same,” Patrick told Guardian Australia on Wednesday. “It left many already struggling people in great distress.”
The ombudsman has recommended the agencies get advice from the solicitor general. The solicitor general has declined, instead asking the agencies to try to reconcile differing legal opinions they have already received first.
If the question cannot be resolved, the ombudsman has recommended a federal court test case. Services Australia has “partially” accepted this recommendation, warning it could take two years to resolve in this way.
The social services minister, Amanda Rishworth, and government services minister, Bill Shorten, welcomed the report into “this serious and complex matter”.
“The practice of income apportionment has not been used to calculate social security payments since July 2021.
“Agencies have confirmed this has not happened under the Albanese Labor government’s watch. However, there may be potential debts or overpayments that remain unresolved.”
Rishworth and Shorten said the issue “has taken too long to resolve and needs to be settled as quickly as possible”.
