Services Australia has been forced to pause Centrelink repayments for 86,000 people over concerns the welfare debts may be unlawful, while warning income support recipients it’s too early to say if those debts will be waived.
In August the commonwealth ombudsman revealed that up to 100,000 debts or potential debts were incorrectly calculated over two decades by “unlawfully apportioning” welfare recipients’ income.
Services Australia responded by pausing the process of raising new welfare debts for affected income earned before December 2020, but has now gone a step further by pausing repayments of those it has already claimed owed it money.
Since Friday the NotMyDebt campaign has received hundreds of reports from people who had faced debts related to income support payments saying that their debts were now missing from the personalised “money you owe” section of the Centrelink website.
Guardian Australia has confirmed two cases of such disappearing debts, including one former income support recipient who had been told they owed $4,000.
The agency maintains the new problem is separate to robodebt, where annual employment income was averaged over 26 fortnights to raise debts, and which a royal commission found was “crude and cruel” and “neither fair nor legal”.
In response to the concerns raised by the commonwealth ombudsman, Services Australia on Monday explained it has “paused debt repayments and internal reviews that may involve income apportionment in response to concerns about the way it was used in the past” before 7 December 2020.
“We’re working closely with the Department of Social Services to get a clear position,” its website said. “The pause will stay in place until we have advice on the next steps.”
“This doesn’t mean your debt has been waived.
“While these debts are paused, they might not appear in the ‘Money you owe’ service in your Centrelink online account. However, they will appear in your debt statement.”
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 breached the Social Security Act, due to an “incorrect” but “genuinely” held understanding of the law.
According to the ombudsman, Services Australia paused about 13,000 debt reviews and another 87,000 files may also be affected.
Services Australia said it is now “writing to people whose debts have been paused”, first by SMS then by a letter “with more detail on the specific debts that are paused”.
“If you get a payment from us, we’ll stop deducting repayments for the debt that has been paused,” it said. “If you have a direct debit arrangement set up with us, we’ll stop the arrangement while your debt is paused.
“If you have other debts that aren’t impacted by the pause, recovery action will continue for those debts.”
In August Guardian Australia reported that prosecutors have paused 32 criminal cases and are investigating possible wrongful convictions due to Services Australia’s misunderstanding about the lawfulness of income apportionment.
A Services Australia spokesperson said the agency had instituted the pause “as part of our ongoing work with the Department of Social Services and the Commonwealth Ombudsman to address issues with the historical practice of income apportionment”.
“The pause will impact approximately 86,000 customers with outstanding debts that are still being recovered,” the spokesperson said.
The spokesperson said the agency had paused referrals to the Commonwealth Director of Public Prosecutions for cases related to income in the affected period and paused recovery on debts referred to the CDPP, including those where a prosecution occurred.
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”.
