About 100,000 people could potentially have their debts cancelled by Services Australia, which is responsible for delivering government payments, after the agency was found to have unlawfully apportioned income.
A new report (pdf) published on Dec. 4 by the Commonwealth Ombudsman revealed that Services Australia and the Department of Social Services (DSS) made a mistake in apportioning, or spreading out, income to calculate social security payment rates.
The issue took place from 2003, and potentially earlier, to December 2020.
The agencies have been aware of the problem since October 2020 but haven’t addressed the issue in a timely manner.
“Services Australia and DSS did not act promptly to address this issue—in the three years the agencies have known about this issue, we expected more action to have been taken to address it,” the report said.
According to the ombudsman, Services Australia and the DSS are still unable to identify how many people were affected or how much payments went up or down because of unlawful calculations.
The agencies are settling a final legal position on how to lawfully calculate its decision before assessing the cases.
Meanwhile, Services Australia has ceased the reviews of about 20,000 debts. It has also discovered that about 87,000 other cases that may become debts.
Ombudsman’s Recommendations
The ombudsman suggested that the agencies should consider forgiving all 100,000 welfare debts that may have been miscalculated.
“The most appropriate as well as fairest way forward to remediate the impacts on customers with unlawful debts might be an approach involving large-scale waiver of debts … rather than seeking to re-calculate over 100,000 individual debts,” the report said.
The ombudsman also recommended the agencies to clearly communicate with customers about review rights or other remedies, as well as with the public.
“Services Australia and DSS have a responsibility to let people know how they may be affected by income apportionment, such as where people are repaying historic debts, and where Services Australia has paused processing requests for explanations of debt decisions or debt reviews.”
Other recommendations include assessing a sample of historic debts and underpayments, developing a remediation strategy for affected customers, creating a system to manage paused debt reviews consistently, and implementing a policy to capture and report on complaints about income apportionment decisions and communications.
The ombudsman office first became aware of the issue in February, and then decided to conduct two investigations into the lawfulness of income apportionment and the agencies’ response to the income apportionment.
The first investigation, Lessons in Lawfulness, was finalised in July.
What Is Income Apportionment?
Income apportionment is a practice adopted by Services Australia to calculate income and social security payment rates between 2003 and Dec. 7, 2020, when the law was amended.
It was a practice used to evenly divide a person’s income across two or more Centrelink reporting periods to calculate the amount of payment support the person was entitled to.Services Australia customers sometimes struggled to understand when they earned income. This could have happened when a pay slip didn’t show hours or days worked, or where a working period didn’t align with a Centrelink reporting fortnight.
“This practice is now identified as unlawful. The law allowed Services Australia to apportion income within the Centrelink fortnight it was earned, derived or received, but not across multiple Centrelink fortnights,” the report noted.
“Apportioning income across multiple Centrelink fortnights caused problems with calculations, as customers could potentially be over- or underpaid under the law if employment income were apportioned into Centrelink fortnights when it was not earned, derived or received.”
The ombudsman said this may have caused Services Australia to increase social security debts, or falsely allege customers of fraud or obtaining financial advantage “based on unlawfully calculated social security payments.”
