In the 2016-17 Mid-Year Economic and Fiscal Outlook, the Government
announced that from 1 January 2017 it would implement a package of initiatives
to enhance the integrity of social welfare payments, including expanding and
extending data matching activities with the Australian Taxation Office and
improving engagement with welfare recipients to ensure that they understand and
meet their obligations.
Coalition Senators recognise that ensuring the integrity of the welfare
system is a key focus for the Australian Government.
The Commonwealth Ombudsman's April 2017 Report, Centrelink's automated
debt raising and recovery system (the report), noted that the Department of
Human Services (DHS) made changes to the online compliance intervention (OCI)
system, partly in response to feedback from the Ombudsman.
The report notes that the 'changes have been positive and have improved
the usability and accessibility of the system. The changes were developed after
more comprehensive user testing involving customers and after seeking input
from the Digital Transformation Agency.'
The report also welcomes 'DHS' advice that it has now removed the
automatic application of the ten per cent recovery fee for customers who engage
, and that 'we acknowledge the improvements DHS has made to its initial contact
letters since 20 January 2017. The current letters now contain the dedicated
1800 compliance helpline number...'
The report concludes that the 'February 2017 changes which include
improvements to the help functions, explanations and overall usability of the
OCI go some way to addressing our concerns about usability of the system.'
Importantly, Coalition Senators recognise that there are elements of the
current welfare system integrity process which are being further improved,
clarified and modernised. These include:
data-matching and case selection;
communications and interactions with recipients, including the simplification of language in letters; and
debt management processes.
1. Improved data-matching and case selection
The Commonwealth Ombudsman report examined the accuracy of debts raised
under the OCI. The Ombudsman was 'satisfied the data matching process itself is
[from its use in past programmes] and that the 'number of instances where no
debts were raised following contact with a customer (approximately 20 per cent)
was consistent with DHS' previous manual debt investigation process.'
Further, the report concluded that 'this figure has been incorrectly referred
to as an "error" rate.'
The Ombudsman further noted that 'We would be concerned if this figure
was significantly higher under the OCI than under the previous manual process.
However, this does not appear to be the case.'
It is important to note that should the information available to DHS be
incomplete, the debt amount may be affected. The Ombudsman noted that 'it is
important for the system design for customers to respond to information
requests from DHS so decisions are made on all available information.'
This approach was endorsed by the Ombudsman which reported 'In our view,
it is entirely reasonable and appropriate for DHS to ask customers to explain
discrepancies following its data matching activities as a means of safeguarding
welfare payment integrity.'
Further, the Ombudsman noted that 'DHS has always asked customers to
collect employment income information during its compliance reviews.'
The Ombudsman also noted 'DHS has told our office the implementation of
future compliance measures will take into account lessons learnt from the OCI.'
Coalition Senators reject the view in the Chair's report that DHS has
reversed the burden of proof onto recipients. The DHS Secretary stated:
How we assess income and calculate debts has not changed. The
data matching process identifies differences, which we ask people to check. No
debt is raised until we have attempted to contact a person and give them the
opportunity to explain differences. Initial letters are not debt letters. The
initial letter requests people to confirm employment and income details and to
correct any inaccuracies. No assumptions about debt are made. A second letter
is also sent to remind people of the need to engage.
Additionally, in its submission DHS stated:
People have always been responsible for providing the
department with correct information – this has not changed. People are obliged
to tell the department when their circumstances change. This can include
changes to their relationship status, living arrangements, care arrangements,
assets or income from work. Debts can arise when people do not provide timely
updates to the department about changes in their circumstances.
Further, as previously reported, the Ombudsman confirmed that the
data-matching process remained unchanged. This supports the information from
DHS that 'The way debts are calculated has not changed. The automated debt
calculation tool has been in use since 2003.'
It was apparent in the course of the course of the inquiry that there
was misunderstanding on the part of recipients and some representative
organisations that recipients have not previously been required to provide
information to support or clarify their claim or payments. The Coalition
Senators do not regard this expectation as a transfer of the burden of proof to
recipients but instead a pragmatic reality that recipients are best placed to
provide information that clarifies or explains their situation.
This expectation must be made clearer to recipients across the welfare
system and explained that this is an ongoing requirement, not just at the time
a payment claim is made. Recipients need to be empowered to manage their
payments and sufficient information provided to recipients from DHS. Further,
in providing information to recipients, DHS ought to draw upon all information
available to it, to both verify the calculations made by DHS and reduce the
requirement for recipients to seek information held by various Commonwealth
authorities which can also be accessed by DHS.
Coalition Senators note and agree with changes made to allow the use of
readily available sources of information such as bank statement. The Ombudsman
The ATO only requires individuals with simplified tax affairs
to retain records for two years. In the OCI context, it may be reasonable for
customers to retain their employment and payroll records for a similar period,
but not for six or seven years, particularly where they have not been
forewarned about this requirement. Some customers may face challenges
collecting this information where their employer no longer exists, is being
unco-operative or has not retained payroll records.
Coalition Senators recommend that DHS continue to invest in its data and
analytical capabilities be further improved. This ought to include an
integrated case selection methodology that draws information together from data
sources such as annual tax returns, financial income, company tax, foreign
pension, family day care and trust income.
Developing a 'whole of recipient' review capability to inform an
enhanced case selection would improve the recipient experience and interaction
with the welfare system, further enhance the integrity of the system and more
efficiently use Australian Government resources.
2. Enhanced communications and interactions with
It was widely recognised, both during this inquiry and in public
discourse around OCI, that communications with recipients, including through
letters and online portals, needs to be clear and include crucial information.
The Ombudsman reported 'In our view, DHS could make further improvements
to improve the clarity of the initial letters and give customers better information
so they understand the information and can properly respond to it.'
DHS explained that
...data matching, sending letters and assessing and calculating
differences in income and payments has been part of the department's compliance
activities for many years. What has changed is the introduction of the online
Through the inquiry the committee heard of difficulties experienced by
recipients in using the portal. Subsequent to these concerns, DHS undertook
improvements and reported '...the screens for the employment income confirmation
system have recently been clarified and simplified...'
The Ombudsman also recognised the improvements that had already been
made, reporting 'Overall, communication within the OCI is improved by greater
clarity. In particular, there are more prominent help functions and
explanations within the system.'
DHS explained that letters have long been used as the primary means in
making contact with recipients in the first instance
The department has always sent letters to recipients and
former recipients, if the data-matching process has identified a difference
between an individual's income tax data issued by the ATO and income data
previously provided by that individual to the department, and the individual is
identified for a compliance intervention. These letters explain that
data-matching has identified a difference, and invites people to log-in to the
online portal to clarify or confirm their income and employment information.
Initial letters are not debt letters. They simply request
people to confirm their employment and income details, and to correct any
inaccuracies. No assumption about debt is made. The letters invite people to
provide additional information. A second letter is also sent 14 days after the
initial letter to remind people of the need to engage with the department.
DHS also confirmed that it is making several changes to improve the
initial contact letters and messages within OCI to make it clearer and more
accessible, in consultation with key external stakeholders.
The department is currently in the process, along with the
Digital Transformation Agency (DTA) and the Australian Taxation Office (ATO),
of undertaking four-weeks of user research to see whether the changes have been
Coalition Senators reject the view in the Chair's report that a lack of
clarity in communications to recipients represents a lack of natural justice or
The DHS Secretary explained the process for recipients following receipt
of the first letter:
Currently, people have 28 days to confirm or update their
information online, with a reminder sent at the 14-day mark. Even with this
amount of time, our experience is that some people will not engage with our
initial letters. Indeed, sometimes they do not engage with us until their
payments are suspended or they receive a debt notice. For example, in 2016 we
sent 260,000 reminder letters to Family Tax Benefit recipients who had not
lodged a tax return. We still needed to raise 65,000 debt notices. Once the
recipients engaged with us, almost a third of those were changed to $0. By
contrast, only 3.5 per cent of the 130,000 online compliance debts raised from
July 2016 to January 2017 were later reduced to $0.
Further, in its submission to the committee DHS explained the avenues
available to recipients to seek a review of the debt calculations:
If recipients do not agree with the assessment of the
information they have provided to the department, there are options for
re-assessment, formal review and appeal ... The department has continued to make
improvements to the debt recovery process, such as pausing the debt recovery
action while the department reviews the debt.
Coalition Senators agree that letters should be in plain, simple and
straightforward language so as to ensure recipients understand them.
It is important that the design and implementation of programmes is
informed by user testing in order to better understand the experience and
behaviour of the users of a service. Coalition Senators recognise that
significant improvements are being undertaken, including more rigorous user
testing and the release of the new-look portal for myGov that has been informed
by detailed user-acceptance testing.
With regard to user testing Coalition Senators note the comments of the
The OCI is a complex automated system that was rolled out on
a large scale within a relatively short timeframe. There will inevitably be
problems with the rollout of a system of this scale. In our view the risks
could have been mitigated through better planning and risk management
arrangements at the outset that involved customers and other external
stakeholders in the design and testing phases.
Coalition Senators recommend that all changes to compliance processes be
subjected to rigorous user testing with recipients to ensure that advice is as
clear as possible and appropriately toned while complying with legislative
System enhancements should be tested, designed and implemented in
consultation with relevant stakeholders and government agencies, especially the
Digital Transformation Agency. Combined with better data analytics, an
iterative and tailored approach to engaging with recipients should also enhance
the integrity of the welfare system and address the concerns raised in the
early stages of the OCI.
3. Improved debt management processes
The committee heard through the inquiry that the majority of people who
have a debt owing to the Government make arrangements to pay that debt
following the information they receive from DHS. If however, the person fails
to engage with DHS to arrange payment DHS will initiate debt recovery.
The committee also heard that external collection agents are not engaged
for recipients currently receiving payments. Debt repayments for current
recipients are organised through alternate means, such as withholding or
reducing payments. For people who are no longer in receipt of welfare payments,
DHS may engage an external collection agency.
The committee heard that external debt collection services are
contractually required to meet all relevant Australian laws and standards, good
industry practice and relevant industry codes, policies and guidelines, such as
'...the Competition and Consumer Act 2010, and the Debt Collection
Guideline for Collectors and Creditors issued by the Australian Competition
and Consumer Commission and the Australian Securities and Investments
Coalition Senators recommend that DHS undertake an examination of the
welfare debt recovery process and identify areas where reforms might improve
the efficiency and effectiveness of debt recovery, including the customer's
experience, and the cost benefit of pursuing debts.
Adherence to privacy
Throughout the inquiry much comment was made regarding privacy of
recipient information. In its supplementary submission DHS confirmed that it:
...is legally authorised to conduct data-matching activities,
and deals with all personal information it holds in accordance with the Privacy
Act 1988 (Privacy Act) and relevant secrecy provisions in programme
Coalition Senators note that DHS:
as required under Australian Privacy Principle 1. In April 2017, the
simplified in consultation with the Office of Australian Information
Further, DHS advised the committee that:
When conducting data-matching activities which do not involve
matching Tax File Numbers, the department adheres to the Australian Information
Commissioner's Guidelines on Data-matching in Australian Government
Administration, which are issued under section 28(1)(a) of the Privacy Act.
Compliance with these Guidelines is not mandatory, but is considered to be best
Coalition Senators recommend that DHS continues to work with the Office
of the Australian Information Commissioner to protect the privacy of welfare
Coalition Senators note that DHS has updated the 2004 Pay As You Go
Data Matching Program Protocol in consultation with the Australian Taxation
Office to reflect relevant changes such as the names of applicable privacy
principles and data-matching guidelines.
The Coalition Senators highlight the changes and improvements made by
the Government to OCI, many of which were made before the commencement of this
inquiry. It has been widely acknowledged by the Government that the initial
rollout should have received more robust planning and consideration of the
impact and operation of increasingly moving to digital engagement. It was also
clear through the early stages of the rollout that further effort was required
to ensure customers had sufficient information and access to resources to
understand their requirements and to navigate the established review processes.
Coalition Senators acknowledge the evidence given by some recipients
from the early stages of the OCI rollout about the confusion they experienced
in being advised of a debt and in providing the information requested. At all
stages of this inquiry the Coalition Senators have been focussed on practical
measures and improvements to address the concerns raised by those who
participated in this inquiry.
Coalition Senators reject the central conclusion of the Chair's report
that the OCI process lacked procedural fairness. Coalition Senators, as did the
Government and Ombudsman, acknowledge that communications early in the OCI
rollout lacked clarity and gave rise to potential confusion on the part of recipients.
However, at no stage did this constitute a lack of procedural fairness as
review avenues remained open to recipients, and still do to this day – any
person with a debt arising from OCI can request a review and provide new
information at any time.
Coalition Senators further note the input from some third parties, such
as #notmydebt, which were aiming solely at scoring political points and
inflaming the situation rather than offering practical assistance in resolving
the issues raised.
To that end, Coalition Senators thank all Senators involved in this
inquiry, the many individuals and organisations genuinely focussed on improving
the process who shared their experiences and, most importantly, the committee
secretariat for the support throughout this inquiry.
Senator Jonathon Duniam Senator
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