A government lawyer "explicitly" encouraged senior officials to ignore a tribunal finding that controversial robodebts could not be legally enforced.
The robodebt royal commission heard Human Services department lawyer Brian Sparkes told his staff to keep using income averaging to calculate welfare debts, even after the Administrative Appeals Tribunal ruled against it.
The tribunal, which conducts independent reviews into decisions made under commonwealth law, found in 2017 that robodebts could not be legally enforced as the process used to calculate them was inaccurate and unreliable.
The unlawful scheme involved using annual tax office data to calculate fortnightly earnings and automatically issue welfare debt notices.
The program wrongly recovered more than $750 million from 381,000 people and led to several people taking their own lives while being pursued for false debts.
When asked by staff if they should write off a robodebt, Mr Sparkes said "it is not the case we cannot raise a debt" as long as they'd tried other methods to accurately find their income.
Angus Scott, counsel assisting the royal commission, said Mr Sparkes was "explicitly" recommending staff act contrary to the tribunal decision.
Fellow Human Services lawyer Damien Brazel said it was the first time he'd seen someone in his department give explicit advice to act against the tribunal.
Also appearing before the commission on Wednesday, Social Services executive Robert Hurman admitted he helped draft a letter to the ombudsman defending the scheme, despite knowing the correspondence contained inaccurate information.
The letter, from Social Services secretary Finn Pratt, said the department was "satisfied the system is operating in line with legislative requirements".
Mr Hurman admitted he was aware of 2014 legal advice that income averaging was unlawful.
He was also quizzed on his department's decision to not provide the ombudsman with that legal advice, but rather 2017 advice that said income averaging could be used as a last resort.
Mr Hurman said former department deputy secretary Serena Wilson had taken the 2014 advice out of the final submission.
"My deputy secretary had made a decision ... it had been made at a more senior level than me," Mr Hurman told the commission.
Earlier, Human Services appeals boss Elizabeth Bundy admitted she hadn't read the initial tribunal finding that struck down robodebt.
Mr Scott, asking questions on behalf of the royal commission, appeared taken aback by her response.
"As manager of the appeals branch ... you had a duty to have regard to decisions of the AAT ... are you saying you didn't read this decision?"
Ms Bundy said it was impossible to read all 13,000 decisions the tribunal made each year.
Despite admitting it was central to her job, Ms Bundy said she hadn't read the 2014 legal advice as "it was an extremely busy time".
