Imagine you get a letter from Centrelink saying you have an outstanding debt of more than half your yearly salary. Oh, and it's due in just over a fortnight.

Brisbane-based single mum Joy got a letter like that before Christmas. (Joy isn't her real name; she's asked Hack not to identify her as her debt is still outstanding.)

Joy receives, on average, about $540 a fortnight in Family Tax Benefits and a partial parental payment to help ease the cost of raising two small children on her own. She works three days a week and earns about $45,000 a year.

So it came as a rude shock in December when Centrelink told her she owed them over $24,000.

"I was really stressed and upset. I work in an open-plan office and was trying not to burst into tears," she told Hack.

"As a single parent, I don't have a safety net of a lot of savings.

I was looking at years of paying off this debt."

Joy went straight to the MyGov site to try and figure out why the debt had come about in the first place.

She was worried she'd made an error in her reporting, but the figure of $24,000 was so big she doubted that was the case.

"I understand that they have to check these things; I have no problem with that whatsoever," she said.

"If a valid debt is found, of course I'll repay it. I want to do everything the right way."

Thousands of letters sent to recipients

Joy is one of the 169,000 people who have received a letter from Centrelink asking them to check if the info they provided to the organisation was correct.

All welfare recipients - including people who got student support payments - are subject to the new compliance measures.

Share Facebook

Twitter

Mail

Whatsapp The generic letter sent to recipients offers little explanation of why they have a debt outstanding.

Centrelink's new automated compliance system has raised red flags all over the place; discrepancies that critics of the system said would not occur if humans were checking welfare records.

The number of letters has ballooned from 20,000 a year to 20,000 a week.

For some people, the automated system assumed that the welfare they receive in a fortnight is the same across the year - without taking into account that some people work casually or only during certain periods.

'I can't afford the repayments'

For Joy, the discrepancy hinged on a simple data entry error.

Centrelink had two different names for her employer - the full name of the organisation and the well-known abbreviation of its name. The new automated system flagged that Joy was therefore working two different jobs and was owed much less in welfare than she had received.

"If it was a human checking this, they would have looked at it and thought, 'hmm, this is suspicious'," Joy said.

Despite being convinced that the debt is not due to an error on her part, Joy has had to start paying it off.

Failing to do so will "appear to be debt-evading" and will make her life even harder, Joy said.

So she set up a payment plan. Debt collectors rang her and asked her to pay back $900 a fortnight. Joy nearly lost it. There was no way she could afford that.

"A lot of my clothes and shoes are hand-me-downs," she said, adding that what little she has left over from tax returns goes towards putting her kids in swimming lessons and having a short holiday outside the city.

I was looking at years of not even being able to afford a few things like that."

Eventually Joy and the debt collectors landed on the figure of $60 in repayments a fortnight.

"I can't afford to lose that amount, but we won't go completely under," she said.

Repayments to be reassessed in 12 weeks

The first payment came out of her account two days before Christmas, and despite the question mark hanging over her debt, she'll have to keep paying it off even as it is being investigated.

She has no idea how long the investigation will take, but debt collectors said they'll reassess her $60 fortnightly payments in 12 weeks' time. If things come out in her favour, she'll get the money back... one day.

"It will need humans to check everything... it's going to take a long time," Joy said.

$300 million goes 'back to the taxpayer'

Social Services Minister Christian Porter defended the automated system, telling Radio National it was getting the job done.

In a high volume system, it's actually working incredibly well."

The Minister said people were sent a "polite letter" asking them if their records were correct. In the vast majority of cases, that is the end of the matter.

"Only in 2.2 per cent of instances [do people need to provide things like payslips]," Mr Porter said.

"So, 169,000 letters and the complaint rate is running at 0.16 per cent. So that's only 276 complaints from those 169,000 letters. That process has raised $300 million back to the taxpayer."

Mr Porter said checking your welfare record was "an inconvenience" but that it was part of a "system of mutual obligation" that "has to occur because it's reasonable to expect that the welfare system is stringent".

Labor thinks it is a farce and has called on the Government to halt the automated system until the wrinkles have been ironed out.

"This is a crude and inaccurate approach... and we think it should stop," Shadow Social Services Minister Doug Cameron told Radio National last week.

"It should be suspended."