Evidence from both the previous and current committee inquiries shows that there is unambiguous support from the community for a strong social welfare system, which necessarily requires the recovery of income support payments from people who have been overpaid. However, witnesses and submitters have outlined the vital importance of having an overpayment recovery system that is legally sound, sustainable, and fair to all of those who are subject to it.
In 2017, the committee's first inquiry into the Income Compliance Program found that the program's initial rollout was characterised by a fundamental lack of procedural fairness in all of its operations and interactions with individuals, as well as serious flaws in its legal foundation and administration. In its report, the committee concluded that the system was 'so flawed that it was set up to fail'.
During that inquiry, the committee found that the Income Compliance Program was incredibly disempowering to those people who had been affected, causing significant emotional trauma, stress and shame.
Despite some incremental changes to the Income Compliance Program's communications and operations in the intervening years, the evidence received by the committee indicates that there has been no reduction in the overall negative impacts on individuals who receive initiation letters and debt notices through the program.
Themes of disempowerment, overwhelming stress and emotional upheaval continue to be common in accounts and submissions from individuals, the community organisations which assist them, and other key stakeholders.
This chapter outlines the nature of evidence received to date about the ongoing impact of the Income Compliance Program's design and implementation on individuals, and the resulting impacts on the community sector organisations and Services Australia staff working to support them.
A program with a devastating impact
The Income Compliance Program has had an overwhelming and devastating impact on many people's emotional and financial wellbeing and willingness to engage with and trust government services.
For some, the shock of receiving notification of a sudden and unexpected alleged debt, particularly if they were already experiencing financial difficulty and long term poverty, has had a ruinous impact on their mental health. The Australian Council of Social Service told the committee that ‘no one should underestimate the stress and anxiety caused' when individuals have received initiation letters and debt notices:
People have reported their life being ruined as a result of robodebt. People have experienced breakdown, anxiety, depression requiring medication, sleeplessness, stress causing physical illness, and fear.
For others, repaying a debt they were alleged to owe under the Income Compliance Program has resulted in considerable financial hardship, pushing them further into poverty and making it more difficult for them to meet basic living expenses, as well as exacerbating their stress and anxiety.
Several individuals have described thoughts of self-harm and suicidal ideation as a very real consequence of being in these circumstances. Recognising that the issues around suicide causation are complex, the committee has received evidence of at least two suicides related to the Income Compliance Program and it is not clear how many more may also be linked to the program.
Submitters and witnesses described how the power imbalance in the operation of the program – where individuals felt powerless to dispute information, letters or debts from Centrelink – could 'wear people down' to a point where they felt compelled to repay debts which they did not think they owed. This was particularly the case when people were fearful that disputing a debt would impact on their ability to continue receiving income support.
One submitter who had assisted her friend in disputing an alleged debt, which was found to be incorrectly raised, told the committee:
I am certain many people just pay the debt because they do not have the resources, skills or time to put up a year long fight with endless phone calls and paperwork, or the ability to follow complex administrative processes correctly when they are completely unclear, or to mount a complex mathematical defence of the debt calculations, particularly when they are have to go through this multiple times.
These impacts of the Income Compliance Program, as well as concerns about its legality and accuracy, are undermining public confidence and trust in the social security system and in the role of Government more broadly. One individual described how her experience of the program had been 'confusing and unfair':
To this day, I don’t have any understanding of the process. What I do know, is that from the start, they were wrong – I didn’t owe the debt that they said I owed. I’ve lost a lot of trust.
National Legal Aid and others warned that public trust in the social security system may be permanently damaged through the impacts of the Income Compliance Program:
Perceptions and experiences of unfairness through the robo-debt process, or excessive use of power such as the use of tax garnishee powers, undermine the public perception of the role of Centrelink. These widespread perceptions of unfairness of Centrelink’s processes become entrenched and this presents a risk that compliance with Centrelink obligations will be reduced.
Ongoing impacts of the Income Compliance Program
In 2017, both the committee's report and the report of the Commonwealth Ombudsman made a number of recommendations to improve the operation of the Income Compliance Program.
Despite the introduction of some of the recommended changes, particularly relating to communication and the online systems used in the program, the negative impact of the Income Compliance Program's design and delivery has continued largely unabated in the time since those first reviews of the program were conducted.
Receiving correspondence from Centrelink
Notwithstanding some improvements made to the initiation letters and debt notices sent out under the program, witnesses and submitters reported that people receiving an initiation letter or debt notice from Centrelink continue to feel confused and distressed by this correspondence.
For example, the Tasmanian Council of Social Service explained that getting a letter from the Income Compliance Program, whether or not it includes a debt figure, puts many people into a 'state of fear'.
It remains common for people receiving an initiation letter to either not understand what the letter is asking of them, or to interpret the letter as a demand for repayment of a debt. Individuals also tend not to draw a distinction between the types of correspondence received from Centrelink under the program, viewing initiation letters and debt notices alike as 'Robodebts'.
Many people receiving an initial letter, debt notice or phone call from Centrelink reported that the communication they received made them feel as though they were 'assumed guilty' at the outset of the income compliance process, with several submitters describing feeling like they had been accused of fraud or of making deliberate mistakes in reporting their income.
Several individuals also told the committee that they were confused as to why they had received an initiation letter asking them to check and update their income, particularly when they had:
reported their fortnightly income diligently in the time period being reviewed;
reported unusual income, such as a lump sum or a bonus, in a particular way on the advice of Centrelink; and/or
continued to receive a payment on eligibility advice from Centrelink.
In some cases, this confusion meant that they did not engage with the program at first, as they did not understand what was being asked of them in the letter or were no longer in receipt of income support and did not see a need to open a letter from Centrelink.
People continue to face significant difficulties in contacting Centrelink to seek information or assistance relating to income compliance reviews and debts.
During the rollout of the Online Compliance Intervention (OCI) iteration of the program in 2016–17, many recipients were directed away from or denied service at Centrelink shopfronts and instead told to use the online portal or phone line to seek help with their review or alleged debt. Ongoing issues with unanswered calls to the dedicated Centrelink compliance phone line served to exacerbate this issue.
Additional employees were allocated to work on the Centrelink compliance phone line and other compliance tasks in an attempt to address these issues, including 500 non-ongoing staff members in September 2017 and a further 1000 in early 2018.
In the 2017–18 financial year, the average waiting time for the compliance helpline reduced to less than one minute, compared to average waits of up to 18 minutes for the main Centrelink customer phone line. By the time of the Commonwealth Ombudsman's 2019 implementation report, it was no longer receiving complaints about accessing the compliance helpline.
However, submitters observed that Services Australia’s overall capacity to assist customers with the Income Compliance Program has not significantly improved, and have called for further additional resources for the helpline and shopfronts to improve service for customers with concerns about their compliance reviews or debts.
Witnesses and submitters also noted that there is a lack of available interpreters for languages other than English, particularly First Nations languages, to assist people in their interactions with Centrelink.
Finding and updating income information
Under the Income Compliance Program, individuals are required to check and update their past income information and report this to Centrelink, generally via an online portal. As evidence of past income, individuals are asked to provide payslips or, where payslips cannot be obtained, bank statements.
Witnesses and submitters have described this process as having created a 'reverse onus of proof' for individuals to show that they do not owe a debt to Centrelink, an issue that will be discussed further in Chapter 3 of this report.
Seeking payslips and bank statements
Before 2016, Centrelink used to advise customers to keep their payslips for up to six months after initially reporting their income, so most individuals who received initiation letters did not have ready access to payslips to reconfirm income information from up to seven years ago.
Individuals continue to report difficulties in retrieving the past payslips and bank statements they require as evidence of their past income, particularly if they were no longer working for that employer, if that employer's business no longer exists, or if they were no longer a customer of the same bank. Many found obtaining this evidence to be time consuming and a stressful process.
The committee heard that some people experiencing homelessness, escaping from family or domestic violence, living in rural and remote communities, or with low levels of numeracy and/or digital literacy faced additional practical barriers when attempting to find their past income information and were not receiving an appropriate level of assistance from Centrelink to do so.
For example, the Financial Counsellors' Association of Western Australia explained that:
It's probably easier for us to go online and get a copy of a bank statement, but for people who don't have access to a computer or don't have the skills to go on a computer, or they have to go physically into the bank—we have clients in Kununurra, Falls Creek and Fitzroy Crossing. You can't just pop into a bank and get seven years’ worth of bank statements. It's just impossible … if you don't have the skills and you need support, then somebody has to help you do that.
Services Australia's information gathering powers
Under previous compliance programs, the then Department of Human Services would frequently use its coercive information-gathering powers under social security law to obtain information such as bank statements and payslips from employers to assist in completing compliance reviews.
Although Services Australia submitted that officers 'are authorised and trained to use information gathering powers to assist people who would be unfairly disadvantaged by their own inability to obtain income information', evidence received through the inquiry suggests that these powers are not being used to any great extent.
Several witnesses and submitters recommended that the agency make greater use of those powers rather than requiring individuals to be responsible for obtaining documentary evidence of their past income to disprove a debt.
Repaying a debt
Reports of financial hardship caused by debt repayments under the Income Compliance Program continue to be common, particularly for those individuals whose debt repayments are garnished each fortnight from their social security payments or from their tax returns.
In one case, a mother of a severely disabled child had her repayment amount increased by Centrelink without her knowledge, causing her to fall behind on rent payments:
… she discovered that her robo-debt repayment had been increased to $300 per fortnight without any consultation. When she explained that by increasing the repayment amount it had put her into rent arrears she was told [by Centrelink] that, "the debt is always taken before your rent".
Several submitters noted that garnishing of income tax returns has become a common practice for the recovery of outstanding income compliance debts, including debts already subject to payment plans, under review or subject to a pause. This appears to contribute to the perception that debt recovery under the program is fully 'automated' and does not have any human oversight.
One debt recipient in Tasmania described the distress and hardship he had experienced because of this practice:
I started on $80 per fortnight repayments but talked them down to $15 per fortnight. The worst thing is that they took out the remaining from my tax refund. I was expecting/planning on a refund at the end of the year but this year they took it all $1100 for the debt. I had no idea. I just can’t see a future. It’s just day by day.
Services Australia advised the committee that it has the capacity to pause debt recovery in cases of financial hardship. However, evidence to this inquiry indicates that individuals were not necessarily aware of this.
For those who did apply for a pause in debt recovery, they found it to be a difficult and frustrating process, with some reporting being required to periodically re-apply and having to provide a new explanation for financial hardship on each occasion, or having their tax return garnished anyway. One witness told the committee that:
They sent a letter saying, 'We don't expect you to pay more than you can afford'. On $275 a week, how much could you afford to pay? They take a minimum of $15 per fortnight. Every three months, I have to contact Centrelink to beg for it not to be raised to $85 a fortnight.
Interactions with debt collection agencies
The committee's previous inquiry heard allegations of inappropriate conduct, including threatening behaviour towards individuals, by staff of external debt collection agencies.
Evidence suggests that individuals continue to be pursued by external debt collection agencies and, in some cases, live in fear of debt collectors and law enforcement agencies because of their compliance debt.
Review and appeals processes
Income Compliance Program debt assessments and decisions are subject to three main types of review:
informal reassessment, based on information provided by the individual and Services Australia, which can be conducted at any time;
formal internal review by an Authorised Review Officer (ARO), which can also be conducted at any time; and
external review by the Administrative Appeals Tribunal (AAT).
When current or former Centrelink customers receive debt notification letters, these letters include some information about their review and appeal rights. However, evidence from the previous inquiry indicated that many individuals were unaware of their right to request a review or did not feel able to challenge the calculation of a debt, or the debt itself.
During this inquiry the committee heard that, despite some improvements to communication with people about their review and appeal rights, this continues to be the case for many of the people affected by the program. One submitter told the committee that, following unfavourable results in an ARO review and first tier AAT appeal:
We thought there were no other avenues to pursue, until I contacted the Not My Debt people who helped me see that we were not wrong and we should push for the 2nd AAT appeal.
For people who were aware of their review rights, National Legal Aid reported that some were refused an internal review of an alleged debt in the absence of new information being provided, in an apparent breach of section 129 of the Social Security (Administration) Act 1999. Others who requested an ARO review were diverted into a less formal reassessment instead.
Many individuals who underwent the process of appealing an income compliance debt found it to be intimidating and emotionally harrowing.
Other submitters expressed frustration that people were receiving conflicting information about review processes from Centrelink staff and had difficulty in obtaining information from Centrelink about their own cases.
Some individuals described the overall process as so overwhelming that they gave up and accepted the alleged debt:
I strove to fight it, I put my debt into appeal. I spoke with faceless people by phone who offered different stories everytime [sic] I phoned. I am not holding these people responsible … They are working within a system that has been created to coerce and intimidate the caller. To confuse and bewilder the person so that they give up and agree to pay the debt, or worse.
While Services Australia told the committee that it was not necessary for individuals to do so, some individuals reported that they had not been able to obtain necessary documents from Centrelink to support their case in a review process or at the AAT except by making Freedom of Information requests.
Furthermore, there appear to have been inconsistencies in practice regarding whether debt recovery is paused by Services Australia during reviews of alleged debts. In some circumstances, repayments were garnished from people's tax returns while an appeal was underway.
Vulnerable people and the Income Compliance Program
The impact of the Income Compliance Program on vulnerable cohorts was of particular interest to the committee during the 2017 inquiry into the program, and recommendations were made in its report that protocols and communication strategies should be put into place to protect these cohorts in the operation of the program.
Similarly, the Commonwealth Ombudsman's 2017 report recommended an expansion of staff assistance for vulnerable participants in the program.
However, evidence to this inquiry shows that the implementation of the Income Compliance Program continues to have a disproportionately negative impact on people in vulnerable cohorts.
Submitters described that people receiving income support are more likely to be vulnerable, or to become vulnerable when a debt is being collected, but that the Income Compliance Program appears not to have adequately taken this into consideration in its design.
For example, the Australian Association of Social Workers told the committee:
Any system that works with vulnerable people and is aware of this has a responsibility to treat their customers with care, respect and trust, and we feel that this debt recovery process is not a process that treats people with care, respect or trust.
Vulnerability 'flags' in Centrelink systems
Services Australia uses vulnerability indicators or 'flags' in customers' files as a means of identifying individuals in vulnerable cohorts. These indicators are designed for jobseeker compliance purposes and include categories such as 'psychiatric problems or mental illness', 'cognitive or neural impairment', 'illness/injury requiring frequent treatment', 'significant caring responsibilities', and 'significant lack of literacy and language skills', among others.
Although Services Australia explained that the recent online iterations of the Income Compliance Program have improved mechanisms for excluding vulnerable individuals, including by implementing daily updates of information about customer vulnerability in the agency's databases, it appears that vulnerable people continue to be contacted and subjected to the program without the supports they require.
Several submitters have recommended that Services Australia needs to improve and extend these mechanisms to more proactively identify and assist vulnerable customers.
Flow-on effects to the community sector and Services Australia staff
The ongoing negative impacts of the Income Compliance Program on the individuals affected by its operation have, in turn, resulted in an increased demand and impact on the community sector and on Services Australia staff.
Impact on the community sector
Problems with the operation of the Income Compliance Program have led to increased demand for the services of legal aid, welfare rights, financial counselling and social service organisations. These organisations are providing assistance for individuals such as, but not limited to:
help with locating income information and updating it online;
explaining financial documents, including debt notices;
explaining other Centrelink documents in plain English;
financial counselling after receipt of a debt;
assistance with seeking internal Centrelink debt review; and
legal assistance for AAT appeals and other legal challenges.
The high levels of demand for this kind of assistance with the Income Compliance Program have resulted in many organisations needing to devote additional staff time and resources to assisting clients in interacting with Services Australia, including in relation to initiation letters and debt notices, with some reporting that they have been unable to meet the level of demand.
A recent study of 218 community support staff working for Anglicare Australia surveyed the time they spent assisting clients with issues related to Centrelink including, but not limited to, the Income Compliance Program:
The research calculated that over a period of a fortnight community support staff in the survey with direct client contact were spending the equivalent of 6.6 full time equivalent (FTE) positions just on dealing with Centrelink issues. … It is anticipated that other community service organisations are having similar experiences.
The financial impact of compliance debt repayments for people who are currently dependent on social security payments has also resulted in increased demand for emergency relief services from these organisations to assist people with meeting their basic living expenses.
Impact on Services Australia staff
The Income Compliance Program has also had negative impacts on Services Australia staff, including those working in Centrelink shopfronts and on phone help lines, social workers, and those responsible for the compliance program's delivery.
Community and Public Sector Union members working at Services Australia reported that the program's implementation had led to 'significant strain' on staff, many of whom have been exposed to increased aggression from customers who are frustrated and upset about alleged Income Compliance Program debts.
Although Services Australia denies that compliance staff are required to finalise a set number of assessments, there have been reports that some staff have been pressured to raise debts to such an extent that they were encouraged to 'cut corners' to meet targets and key performance indicators. The National Social Security Rights Network submitted that:
According to whistle-blowers, compliance staff are ranked on their ability to finalise cases. The staff are apparently required to finalise five cases a day and instructed to do everything possible to accelerate the debt raising process. The system of performance targets is designed to publicly shame staff into meeting or exceeding targets and encourages a culture of bending the rules.
These issues have been exacerbated by cuts in staffing levels at Services Australia in recent years, with a reduction in the permanent workforce of the whole agency by approximately 20 per cent since 2010–11 and significant outsourcing of compliance work to contracted private companies.
For example, approximately two thirds of the nearly 650 staff members allocated to identifying compliance debts raised based on income averaging after announcements in November 2019 came from labour hire companies rather than the public service workforce.
The combination of higher workloads and higher levels of customer aggression have led to a reduction in morale among Services Australia staff and concerns that the program has undermined the public's trust in government and confidence in the social security system.
The evidence received to date clearly shows that the myriad problems with the Income Compliance Program's operation and its destructive negative impact on individuals have not been resolved.
Despite several reviews of the program and numerous recommendations made to improve it, nothing has fundamentally changed for those affected over the five years of its delivery.
The emotional turmoil, stress and financial impact that hundreds of thousands of people have had to endure under the program should not be underestimated and cannot be ignored.
While new initiations have not been sent out following revelations about the program's legality last year, and debt recovery remains paused during the COVID-19 pandemic, it is unclear how or when the Income Compliance Program may recommence. These issues are considered further in Chapter 3.
Uncertainty about the future of the program is likely to be causing additional distress for individuals who have debts or reviews that are currently paused.
The committee is adamant that people should no longer be subject to the fundamentally flawed Income Compliance Program, particularly in light of the significant announcements over the past year about the massive number of people who received debts without any legal basis.
The committee recommends that Services Australia immediately terminate the Income Compliance Program.
This means that all income compliance assessments currently under pause should not recommence, nor should any new initiation letters be sent to individuals, following the pandemic grace period for Centrelink debt-raising and recovery.
The committee notes that the cessation of the Income Compliance Program should not preclude people from continuing to seek reviews or appeals of debts already raised through the program, nor should it prevent the timely repayment of debts which were unfairly raised based on income averaging.
Given the uncertainty around the Commonwealth Government's intentions for Income Compliance Program at the time of this interim report, the committee is not in a position to make broad recommendations for improvements to the design and operation of broader government compliance programs for the recovery of social security overpayments.
The committee instead intends to continue to monitor these issues and make specific recommendations in its final report.
However, the committee is concerned that some of the ongoing issues around communication and resourcing could complicate the repayment of unlawfully-raised Income Compliance Program debts, if not immediately addressed by Services Australia.
The committee recommends Services Australia ensure its communication strategy relating to the repayment of unlawfully-raised compliance debts takes into consideration the additional needs of and provides appropriate supports to:
vulnerable populations, such as people with disability or who are experiencing homelessness;
people with low literacy and numeracy; and
people for whom English is not a first language.
The committee further recommends Services Australia immediately allocate additional staff to focus on contacting customers who have not engaged with the refund process in order to ensure the repayment of all unlawfully-raised compliance debts to all affected individuals is completed in a timely manner.