Commonwealth prosecutors have dropped dozens of welfare fraud cases affected by unlawful Centrelink debt calculations, as Services Australia continues the cleanup of tens of thousands of doubtful debts.
But the federal government’s welfare agency and prosecutors have been unable to say how many past convictions may be affected, after an embarrassing commonwealth ombudsman report revealed that up to 100,000 debts were incorrectly calculated over two decades by “unlawfully apportioning” welfare recipients’ income.
On Monday Guardian Australia revealed Services Australia had paused Centrelink repayments for 86,000 people but warned income support recipients it is too early to say if those debts will be waived.
In August, 32 cases before the courts were adjourned while the commonwealth director of public prosecutions (CDPP) reviewed them.
A spokesperson for the CDPP told Guardian Australia that “all charges before the court that have been identified to the CDPP by Services Australia as being affected by the income apportionment issue have been or are being discontinued and defendants and or their legal representatives have been advised accordingly”.
“As at 31 October 2023 the CDPP has withdrawn prosecutions against 34 defendants in their entirety.
“A further three matters are before the court and affected charges will be discontinued.
“There have also been a further six matters identified by Services Australia that were the subject of warrants. Three are listed for discontinuance before the court and three are in the process of being listed for discontinuance.”
Under social security rules, welfare recipients must report their income fortnightly to Centrelink so the agency can calculate their rate of payment. In some cases the payslips relied on by Services Australia to calculate how much a person is entitled – and whether or not they may have been overpaid and owe a welfare debt – does not 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 breached the Social Security Act, due to an “incorrect” but “genuinely” held understanding of the law.
Services Australia maintains the new problem is separate from robodebt, where annual employment income was averaged over 26 fortnights to raise hundreds of thousands of unlawful debts, and which a royal commission found was “crude and cruel” and “neither fair nor legal”.
In August the welfare law expert Chris Rudge said incorrect debt calculation could affect convictions for offences related to overpayment including obtaining financial advantage, which is punishable by up to a year in prison.
It is still unclear how the CDPP and Services Australia will deal with past convictions.
The CDPP directed questions about the number of past convictions and the way forward to Services Australia, which in turn referred the query to the CDPP.
“The CDPP continues to work with Services Australia in relation to this issue,” it said.
A Services Australia spokesperson said it “only makes a referral to the [CDPP] for serious matters that are supported by a brief of evidence”.
“People are never referred to the CDPP for overpayments alone,” the spokesperson said. “Conviction and prosecutions are matters for the CDPP. Services Australia is working closely with CDPP to establish how many past matters may be impacted by income apportionment.”
On Monday, Services Australia said it had “paused recovery on debts referred to the CDPP, including those where a prosecution occurred”.
“The CDPP is writing to these customers who are still subject to a court order to alert them to this.”
Rudge said the CDPP should “develop a strategy with the agencies to identify those previously subject to a conviction or a prosecution [for which] the brief of evidence contained apportioned income”.
Once identified, a “special judicial review” should be set up to re-decide the cases “on the papers” without requiring each to appeal separately, he said.
The social services minister, Amanda Rishworth, said in August that apportionment was a “really complex problem” that affected income support from 2003 to 2021.
“It is complex because on some weeks you may have been underpaid because of that method,” she told Guardian’s Australian Politics podcast. “On other weeks you might have been overpaid – because you did actually earn the income. It’s just which fortnight was it apportioned to.”
Rishworth said she wanted to see “the legal questions resolved as soon as possible so there’s some certainty around this issue”.
