Welfare recipients threatened with fee if they don’t justify their receipt of benefits from up to six years ago

This article is more than 3 years old

This article is more than 3 years old

The federal government has been urged to stop unfairly stinging welfare recipients with a 10% “debt recovery fee”, a practice the human services minister, Alan Tudge, said was news to him when asked about it.

Centrelink is in the midst of a major push to retrieve welfare debts from low-income Australians, using an automated system to detect possible overpayments.

Roughly 20,000 letters are being sent to welfare recipients a week, telling them a discrepancy had been detected and demanding they justify their receipt of benefits from up to six years ago.

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Those targeted are being threatened with a 10% debt recovery fee if they don’t respond but many have told Guardian Australia that they are not receiving letters, because they have changed address.

Tudge expressed surprise when asked about the 10% debt recovery fee on Thursday, telling the ABC: “That’s new to me, a 10% recovery fee is new to me and I don’t believe that does occur.”

But the department’s letters to welfare recipients clearly show the threat of a 10% debt recovery fee is being used.

In one letter sent to Timothy Heywood, Centrelink said it believed he had been overpaid and warned the 10% fee could be charged if he did not respond.

“If a debt arises and a reasonable excuse is not provided, a 10% recovery fee will be added to the debt amount,” the department wrote. “If you do not respond, it will be assumed no reasonable excuse applies and the 10% recovery fee may be added to the debt amount.”

Many welfare recipients are either not receiving the letter because of a change of address, or have found themselves unable to lodge a dispute because of errors with Centrelink’s online portal.

Heywood was locked out of the online portal for 21 days, making it impossible for him to dispute the debt. He was later given an extension, after Guardian Australia raised his case with the department.

The chief executive of the Australian Council of Social Service (Acoss), Cassandra Goldie, wrote to Tudge on Thursday, urging him to drop the fee in cases where individuals could not be contacted.



“Where contact cannot be made with a person, a recovery fee charge should not be applied because it cannot be verified that they have received information about a debt from Centrelink (and therefore they are unable to provide a reasonable excuse),” Goldie wrote.



A spokeswoman for Tudge said the fee would not be applied until the person had been contacted, unless they had refused or failed, without reasonable excuse, to provide information, or knowingly or recklessly provided false information.

Acoss is also concerned about looming changes that will allow Centrelink to begin chasing debts that are more than six years old. New laws, passed as part of the government’s omnibus savings bill, remove the six-year limit on welfare debt recovery from 1 January.

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Tudge told the ABC on Thursday that he had “no plans” to chase debts that were more than six years old. “We’re not going further back … we have no plans to do that,” he said.

But the explanatory statement to the government’s bill states that the intent of removing the six-year limitation is to prevent debts “ageing out”.

It forecasts removing the limit, and instating travel bans for those who don’t pay back debts, will give the government $157.8m in savings over the forward estimates.

“Removing this limitation will prevent debts from ‘ageing’ out of recovery, and will improve the ability to recover old debts,” the explanatory statement said. “Debt recovery will be able to commence at any time.”

A spokeswoman for Tudge on Thursday said debts “should be recovered wherever possible for the benefit of taxpayers”.

“Removing the statute of limitations allows for the pursuit and recovery of social welfare debts, regardless of age, and provides for treatment similar to the recovery of other debts owed to the commonwealth, such as taxation debts,” she said.

Acoss’s letter to Tudge also raised a number of other “serious concerns” about the government’s debt recovery, including complaints about the data-matching system being used to detect overpayments.

Goldie said people were left unable to dispute debts because of faults with Centrelink’s online system but are being left with no other avenue of contact.

Centrelink offices are refusing to discuss the compliance letters in person, she said, and Centrelink is failing to make personal contact before referring cases to debt collectors.

“The scale and timing of this process is also alarming. It is important to consider the reduced capacity people have to engage with Centrelink at this time of year, not least because of Centrelink’s closure at times over the Christmas period,” Goldie wrote.