Former and current students say Centrelink is falsely accusing them of being welfare cheats and saddling them with thousands of dollars of debt.

Sianaye studies full-time, works retail part-time. One month ago, the 23-year-old from Melbourne learned she owed $3,500 for Centrelink payments from 2011 to 2013.

According to Centrelink's system, Sianaye had been earning money during fortnights when she reported no income. Welfare fraud.

But on closer inspection, this claim may not stack up. It appears to be based on faulty data, and has effectively created a debt that isn't there. Sianaye now has to gather pay slips from five years ago to prove Centrelink wrong. The process has taken days.

"They've proven me guilty before I'm innocent," she said.

She is one of thousands of people who are being sent letters by Centrelink about apparent welfare fraud. It's the result of a brand new system that matches the income you declared to the Australian Taxation Office (ATO) with the income you declared to Centrelink. It's able to go as far back as 2010. When it detects a disparity, it automatically generates and dispatches a letter. For the Government, it's all about clawing back billions of dollars believed to have been incorrectly paid to welfare recipients.

The Department of Human Services, which operates Centrelink, says it is not aware of any problems with its new automated system. It also says there are no online access problems.

Despite these assurances, Independent Federal MP Andrew Wilkie is calling on Centrelink to shut the system down. He says he is hearing from "distraught and terrified" people hit with "incorrect" debt notices. Hack has heard similar stories. Wilkie says the system has "gone rogue".

The apparent problems with the new software comes only months after Centrelink payments were delayed up to four months because of IT issues.

What is the system?

We first learned of the automated compliance system on December 5. By then, the technology had been operating for about five months. According to Minister for Human Services Alan Tudge, the system was detecting 15 times more in welfare debt than before - a massive $4.5 million a day. The number of welfare fraud detections had gone up from 20,000 per year to 20,000 per week.

In the past, staff manually checked customer records against data provided by other government agencies. Discrepancies were followed up with customers via letter and phone, taking much longer than through the automated system.

Over three years the new system was expected to send 1.7 million "compliance" notices. All up, the system would recover over a billion dollars of welfare debt, Minister Tudge said.

This is how it works:

The system sends you a letter advising you of a potential welfare debt and asks you to review its figures online. It also sends an SMS.

When you log on you can update the information. You have 21 days from the date of the letter to go online and update.

If you don't log on, Centrelink will make a default judgement its information is accurate. You will then be issued with a debt notice.

If you do update the information, Centrelink may ask you to provide supporting documentation. This can include bank statements, letters from an employer, or payslips.

If you think the decision is wrong you can ask for a review.

What are the potential problems?

Problem One: Averaging annual payments into fortnights

The system compared the ATO's record of Sianaye's income with Centrelink's record of her income, but there was a catch; the ATO data was annual, and Centrelink's was fortnightly.

We don't know how Centrelink gets around this, but, at least in Sianaye's case, it looks a though it has divided the ATO figure by the number of fortnights in a year. It's assuming all the money earned in one year has been earned evenly over 26 fortnights.

Sianaye declared $14,414 to the ATO in 2011-12. That works out to about $550 per fortnight.

According to Centrelink, some fortnights she reported earning no money. Therefore over two years she had been overpaid more than $3000 in welfare.

Except the calculation is based on false assumptions. "I was in year 11 working casually at K-Mart," Sianaye told Hack. Like for anyone working part-time retail, her income has fluctuated, and most of the money was earned in the summer holidays. It's incorrect to assume she earned the same amount every fortnight, or that she was earning money when she reported no income.

Her brother, Brodie, 29, believes Centrelink used the same method to calculate he owed about $900 in welfare debt. "They've taken that lump sum figure from the ATO and divided it. I reported $1,600. They worked out I should have reported $2,600."

"I had just started a sales job and didn't earn a commission for the first two months. I started out on a low wage then my pay went up."

Problem Two: You may not know you have a welfare debt

If you don't get the letter, you won't know about the debt. You may not get the letter if you have changed your address since you were on welfare.

On November 4, Brodie received an SMS that read: "Please confirm your employment income by 11/11/2016 as requested in our recent letter." He had never seen a letter and he hadn't been on Centrelink since 2014. "I've moved house a few times in the last few years. I figured if it was anything serious they would have called." He ignored the SMS.

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Then on November 16 he received an SMS that said: "We have completed our review of your employment income. Please sign into your Centrelink online account."

He ignored that too. "I figured I should call them but I knew what a nightmare it was to call Centrelink, so I put it off."

It wasn't until December that Brodie finally learned he had a welfare debt. He's begun gathering payslips. "I reached out to my old work. Luckily we're still on good terms and they have the same account software and bookkeeper," he said.

Problem Three: Navigating Centrelink

Compliance issues cannot be dealt with face-to-face in a Centrelink office - they have to be done over the phone and online. Last year an auditor had found almost a quarter of calls made to Centrelink went unanswered. It would be fair to assume the number of calls to the hotline has gone up since Centrelink began generating 50 times more "compliance interventions".

On a popular Reddit thread set up two days ago, one user described waiting for hours to speak to someone about his compliance notice.

1st call - Waited over an hour and finally got through and the person on the other line hung up on me. I could hear them typing on their keyboard for about 10 seconds before the call was disconnected.

2nd call - Waited about 45mins and when I got through, I managed to say 1 sentence before I got interrupted and was told "I need to transfer you to the right department" and off I went to the "RIGHT" department which turned out to be an answering machine which took my name and number and said they'll return the call.

I received the return phone call about 4 hours later.

Tim Heywood, 29 and from Melbourne, says he has been regularly trying access the online "compliance portal" since receiving a letter on November 29.

"I walked into a Centrelink Office on Friday 2nd of December ... I spoke to the concierge there, showed him the letter and he said as a compliance issue it must be dealt with online," he told Hack.

"I commented that online portal is not working for me and that I would like a number to call ... he said they do not have any power to do that and that it can only be done online.

"Being left with no options to resolve the issue, I said thank you and walked out to my car. I tried the compliance portal various times over the next few days. It failed to operate with a 'Service unavailable at this time, please return home and try again'."

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Whatsapp Sianaye (l) and her brother Brodie (r).

Sianaye says she has struggled to update her information online. "If you go into a Centrelink office they say 'Sorry I can't deal with you'." She says she has been unable to upload her supporting documentation and was even told to try faxing them through instead. Meanwhile, her review is scheduled for after the payment date, and she has been told to pay the debt and then see a refund if the review is successful.

"They also have the audacity to charge me $280 as a service fee," she said.

"I've been spending hours doing all this. In the last two days I have spoken to seven people from the Department of Human Services."

According to the Department of Human Services, there are no problems with access to the online system. "We are confident in the system and are not aware of any issues affecting access to the online compliance system," the Department's General Manager Hank Jongen said.

"As always we will continue to monitor the progress of the compliance activity."

Problem Four: Who keeps pay slips from six years ago?

Independent Federal MP Andrew Wilkie is calling on the Centrelink to stop issuing the debt notices, which he says are often incorrect and treat people as guilty until proven innocent.

He said the program was "another cruel and ideological attack ... on the nation's vulnerable and disadvantaged."

"These people can explain why they were not overpaid, but are struggling to lay their hands on the documents to prove it as the so-called debt dates back years and in some cases their employers have gone out of business."

"How many of us could lay our hands on a pay slip from six years ago?"

In a statement to Hack, Hank Jongen said the Department was undertaking a review of income going back to 2010-11. "The department does not routinely require customers to provide payslips," he said.

The apparent problems with the new system throw into doubt expectations of a welfare debt windfall of $4.5 million per day. The money may evaporate on contact with reality. The problems also expose Centrelink to accusations of bullying - of recklessly naming debts and hoping members of the public will pay up instead of going through an arduous review process.