Centrelink has been referring aggrieved payment recipients who say they are receiving demands for debts they don't owe to Lifeline's mental health and suicide hotline.

Centrelink has been openly referring to Lifeline people who say they have been targeted for repayments of non-existent debt under a new automated system.

NITV News has revealed that Indigenous Australians have been caught up in the growing debt claims issue. Some people attested they were receiving demands for repayments of more than $20,000, as Centrelink accused them of under reporting their income while receiving benefits.

Since July 2016, a total of 170,000 debt recovery notices have been sent out to Centrelink recipients.

Former Greens leader Christine Milne tweeted "What sort of Government terrifies its poorest people then tells them to ring Lifeline? Centrelink debacle must stop. PM should intervene now."

A man on Twitter today revealed a friend had received an alleged wrongful debt claim of almost $140,000.

He tweeted: "Wow. A friend has posted on Facebook a $140 000 made up @Centrelink debt. Total joke." he then tweeted a screen shot of the Centrelink debt balance.

NITV News has approached the man for further comment.

The demands for non-existent debts come as a result of a new information sharing agreement between Centrelink and the Australian Tax Office (ATO), which is averaging people’s annual income across a whole year. Periods where people reported no income have now been incorrectly recorded against them by Centrelink as income earning periods.

The algorithm used is unable to differentiate between fortnightly reported income and the total income earned in a financial year. It’s been reported that no one at Centrelink foresaw the problems this would create.

School teacher Nicholas Kuilder received Newstart payments for 6 months in 2012 while looking for new work after relocating to a new city. Once he obtained work he cancelled Centrelink and thought nothing more of it.

“I then receive a letter claiming I owe Centrelink over $3800 from that financial year,” he told NITV News yesterday.

“This didn't seem right as I always reported my income correctly and was pretty diligent with my paperwork."

“We then found that the fault in the problem was that their system did not recognise that the schools I was reporting as having worked at all fell under the banner of the Department of Education, and were not separate ABN's from my Payslips. So essentially, they had doubled all of my reported earnings from the time I was on Centrelink."

Department of Human Services General Manager Hank Jongen told NITV News the letters were not debt demands.

"When data differences are detected, the system generates a letter (this is not a debt letter) advising people of the difference and asking them to either confirm or update their details online using myGov," he said in a written statement.

"If the employment income was earned before they began receiving or after they stopped receiving income support payments, then they will not incur a debt."

He also said that a majority of claims had been able to successfully resolved through Centrelink, but did not say in how many cases Centrelink had wrongly calculated a discrepancy using ATO data.

"Over 70 per cent (72 per cent) of people who received an online compliance letter since September this year have completely resolved the matter," he said.