A young Melbourne woman is challenging Centrelink’s automated debt-recovery system known as ‘robo-debt’ in a landmark case.
Madeleine Masterton, represented by Victoria Legal Aid, is taking her case to the Federal Court to see whether the process that calculated an alleged robo-debt of around $4,000, is lawful.
Madeleine's alleged debt arose when she was studying and receiving Youth Allowance. She said she was surprised at the lack of transparency from Centrelink, 'At the time I was given no information about how my debt was calculated.'
Ms Masterton, who works as a nurse in a Melbourne hospital, said she hoped the case would help other people; 'I feel a social responsibility to push forward, especially if that means that people who are less equipped or less able, do not have to deal with this as well,' she said.
Rowan McRae, Executive Director of Civil Justice, Access and Equity at Victoria Legal Aid said, 'We’ve provided over 500 legal services to people who had robo-debts and heard stories from people around the country. It’s clear robo-debt is deeply flawed and continues to cause people distress and hardship.
'We want this case to pave the way for a fairer, smarter and more accurate system which works for government, but also for the many people who access social security at some point in their life,' she said.
'The way robo-debt averages people’s income assumes that they work neat, regular hours throughout a year. In reality, we know people work part time or sporadically throughout the year, because they’re studying, can’t get regular work, have multiple jobs or are unwell. This means the calculation of alleged ‘overpayments’ is often inaccurate.
'Our clients have included seasonal workers with thousands of dollars of incorrect robo-debts raised during the off-season, as well as former uni students who can’t work out how their alleged robo-debt was calculated. We’ve seen single parents unable to make back-to-school purchases, because they’d been penalised by Centrelink when they hadn’t chased up old bank statements or payslips', said Rowan.
Victoria Legal Aid will argue that Centrelink’s approach to estimating whether someone has been overpaid falls well short of what the law requires. The basic Australian Taxation Office information Centrelink uses and the crude calculations it does, do not provide a basis for assessing what a person actually earned, or whether they were overpaid. The legal argument is that a debt to Centrelink can’t lawfully be imposed based on such numbers and processes.
Rowan said the case was not about letting people avoid paying back lawfully established debts. 'Centrelink should create a system that encourages accurate reporting and fairly investigates overpayments. What we can’t accept is a system that is so clearly not working, that has been proven to be causing overwhelming hardship, and that a Senate Committee has recommended be suspended.'
'The government should embrace technology, but it has to do it smartly. We hope the court will ultimately find that robo-debt is unlawful and that a system with integrity will follow.'
In July 2016 Centrelink switched to an automated system to identify social security overpayments. It became apparent that the system was incorrectly calculating people’s fortnightly pay, by averaging their yearly income information from the Australian Taxation Office. Previously, compliance teams would manually check differences in tax and Centrelink records. The new system automatically sends letters to the welfare recipient asking them to provide financial information. Where people can’t or don’t provide detailed evidence about their previous income, a debt is assumed to exist, and they are pursued by Centrelink and debt collectors.
The case has been filed in the Federal Court and it is expected an initial hearing will take place in weeks.
Our client Madeleine Masterton says:
- 'One of the main reasons I went to legal aid was because I didn’t trust that Centrelink was calculating the figure properly and there is no transparency about how they come up with it.'
- 'I have a social conscience and if I can do something so that other people don’t have to go through undue stress – especially people who don’t speak English well or people who might just panic and pay the debt out of fear. If I can prevent other people going through that, I should – I have a duty to do that.'
- 'If my case proves the whole robo-debt system is wrong under the law, then I hope that the system is wiped and that everyone else who has a debt is freed from it until a better system is in place that calculates transparently and correctly.'
- 'This case isn’t just about me and if I can make life easier for other people then that would be a successful outcome.'
Rowan McRae is available for comment and a photo can be supplied. Our client Madeleine Masterton is not available for interview.
Reviewed 14 April 2022