The package, unveiled by Social Services Minister Tanya Plibersek, will provide compensation of up to $600 each to those affected by the unlawful debt calculation method.
Additionally, the government will raise the threshold for small, accidental debts to $250, a move expected to wipe out or prevent around 1.2 million debts from being raised in 2025-2026.
Background of the Issue
The income apportionment method, used by Centrelink, assumed a recipient’s income each fortnight if their pay did not align with Centrelink reporting periods.
This led to many Australians being wrongly pursued for debts, causing significant stress and financial hardship.
The Federal Court ruling in July confirmed that the practice was invalid, and the new process in place since 2020 is lawful.
Compensation and Support
Those who had debts calculated under income apportionment between 2003 and 2020 will have them waived and will receive compensation of up to $600.
Furthermore, the government will provide $400,000 each to two advocacy groups, Economic Justice Australia and the Australian Council of Social Service, to help welfare recipients navigate the claims process.
Government Response
Minister Plibersek stated that the waiver was necessary as the cost to recover the debt was often higher than the amount owed to the government.
She emphasized that the package would ensure that Services Australia does not waste time or resources chasing accidental debts that are uneconomical to recover, and spare Australians with small debts significant stress.
Minister for Government Services Katy Gallagher welcomed the changes, saying that Labor was “learning from the mistakes of former governments” and that the government must work towards ensuring that debt recovery processes are fair and transparent.
Reaction from Advocacy Groups
The Greens social service spokeswoman, Penny Allman-Payne, praised the debt waiver, citing the systemic issues with the way the welfare system treats people living in poverty.
Antipoverty Centre spokesman Jay Coonan expressed relief at the measures but emphasized the need for further support for welfare recipients.