A single mum who took on Centrelink after they demanded the return of a $40,000 overpayment has had a big win as the case finally comes to a close.

Two years ago, Carly Hockey got a series of bills from the government, telling her she had been overpaid thousands in the family tax benefit she had been claiming.

However, the overpayment was the result of a Centrelink computer error, and despite admitting that, they demanded she pay it back.

Carly Hockey was had a big win after Centrelink demanded she return a $40,000 overpayment. (A Current Affair)

"We had no reason to believe at any point that there was anything wrong with our payments because we were reassured by Centrelink repeatedly that our payments were correct," Ms Hockey told A Current Affair .

"I did all the right things, I gave Centrelink the correct information."

The Administrative Appeals Tribunal also determined Centrelink was at fault and said the debts ought to be waived.

Centrelink appealed that decision, but as Ms Hockey readied herself for another lengthy legal battle, the welfare body did a backflip.

Ms Hockey said she had provided all the correct information. (A Current Affair)

"The case is finished," Ms Hockey said.

"My solicitor came to an agreement with Centrelink's solicitor that we would settle the case with Centrelink waiving 70 percent of the debt that was held against me, which was an outstanding result."

This has reduced Ms Hockey's debt to about $6000.

She hopes that by speaking out, she can help others facing similar battles with Centrelink.

Centrelink has refused to make further comment on the case. (A Current Affair)

"You can fight the system and there can come a point where you have success – if you do the right thing," she said.

In a statement, the Department of Human Services said it had no further comment to make on the case.

"However, we take our responsibility as custodian of taxpayer funds extremely seriously," the statement said.