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A 33-year-old Melbourne woman discovered she apparently owed thousands of dollars to Centrelink when the government withheld the full amount she had expected to be paid out from her tax return.

The Department of Human Services is claiming Deanna Amato owes $2,754 for payments made to her while she was receiving Austudy when studying in 2012. This debt was calculated by an automated debt recovery system dubbed "robo-debt".

"My tax return was $1,709.87 and they took every cent [in January]. It was shocking that they could take the money without me even knowing that a debt existed and without actual proof," the local government worker said.

"It felt like guilty until proven innocent."

Victoria Legal Aid is mounting a legal challenge against Centrelink's robo-debt program on behalf of Ms Amato, in what will be the second test case against the controversial debt reclamation program.

The case has been filed against the Department of Human Services. An argument will be made that the automated system that calculates the debt is unlawful.

SUSSING OUT ROBO-DEBT

Centrelink recipients have to report their income (and any changes to it) every fortnight.





If it's done incorrectly and you're overpaid, you have to pay the money back.





As of July 2016, Centrelink has been using an automated system to issue debts. They compare the data recipients provide with data from the Australian Tax Office. The "robo-debt" is calculated by averaging all the information.





More than 400,000 robo debts have been issued by the government. Nearly 20 per cent have been reduced, waived or written off.





More than 2030 people have died after receiving a robo-debt, roughly one-fifth were aged under 35.





The government has spent at least $400 million to recover $500 million from welfare recipients through the scheme, senate estimates were in February.

Victoria Legal Aid filed their first robo-debt case on behalf of nurse Madeleine Masterton earlier this year. During the proceedings, Centrelink wiped her $4,000 debt.

Ms Masterton said she will press on with the case, which will go to a hearing in August.

"I hope my experience will make more people aware of their rights when it comes to the robo-debt system," Ms Masterton said.

Victoria Legal Aid's Executive Director of Civil Justice Access and Equity Rowan McRae said the robo-debt process is opaque and unfair.

"We think it's critical for a court to look at the process Centrelink relies on to decide that people owe them money," he said.

"These two women are asking the court to decide whether that process complies with the law."

Department of Human Services General Manager Hank Jongen said it would be inappropriate to discuss a matter that is before the Court but the debt collecting process is reasonable.

"The Commonwealth Ombudsman, in reviewing our processes, found that it is reasonable and appropriate to ask people to explain discrepancies in data," he said in a statement.

By Emily Jane Smith - emily.smith@sbs.com.au