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This article is more than 1 year old

Townsville flood victims have been caught up in Centrelink’s welfare debt recovery scheme after the agency relaunched robodebt operations in the north Queensland town.

Flood-affected areas were quarantined from Centrelink’s welfare debt compliance activities in the aftermath of the natural disaster, which left three people dead and damaged more than 3,000 homes in February.

But Guardian Australia has learned that this month Centrelink staff were told to resume compliance action in the Townsville region, sparking concern and dismay among some department employees and prompting the mayor to call on the government to reconsider.

Michael Murray, a lawyer at the Townsville Community Legal Service, said some residents affected by the floods were now being drawn into the controversial debt recovery program.

“Certainly in the past few weeks there’s been an increase in clients coming in to get advice about robodebts. Whether they’d received a notice to confirm their income, or further down the track in that appeals process,” he said.

“I can already see some of them were impacted by the floods,” Murray added, referring to case files the legal service has on hand.

“You’ve got people who might have lost their homes or lost their belongings or lost their jobs as a result of the floods, they’re still dealing with all of that. They’re also dealing with the robodebt issue as well.”

The Townsville mayor, Jenny Hill, said the town was still recovering from the floods and that resuming welfare debt compliance operations would only make matters worse.

“We know that many of these families have not been able to return to their homes,” she said. “I’d urge the federal government to review the recommencement date of the recovery of these debts because there could be a very real human impact on a community that is already hurting.

“Everybody is still trying to get over everything. We’ve got a decent proportion of our community that is still struggling.”

Staff were told to resume compliance action in Townsville just as welfare debt compliance activities were expanded to allow the government to garnishee alleged debts through family tax benefit payments.

The robodebt scheme is currently the subject of two legal challenges from Victoria Legal Aid, which is contesting the way Centrelink calculates alleged debts.

The most contentious aspect of the scheme is a tool that averages a welfare recipient’s employment income over an entire year to determine if they were overpaid. The tool only supposed to be used only when a recipient has not provided payslips or bank statements to calculate a potential debt.

Many welfare recipients have spoken of the difficulty of accessing such documents, and there is concern that people affected by the floods will find it even more difficult to provide evidence of their past employment income.

Centrelink also has the legal ability to compel companies to provide bank statements and payslips, where a vulnerable person has been unable to obtain them, but the agency has been accused of failing to adequately use the power.

The government is on track to issue more than 200,000 debts this financial year and has raised about $555m. In total, about 500,000 debts have been raised, and about 170,000 have been referred to an external debt collector.

A Department of Human Services spokesman, Hank Jongen, said it was routine practice for “local compliance activities to be temporarily suspended during natural disasters”.

“This occurred for customers impacted by the far north Queensland floods,” he said.

“When compliance activities resume, staff work sensitively with customers, taking into account their circumstances. This includes giving people additional time as supporting documentation may not be readily available and any further support required.”

Jongen said the department had a “proud history supporting people affected by natural disasters, and the far north Queensland floods are no exception”.

“We granted more than 109,000 claims and paid more than $120m in disaster assistance to people affected the floods.”

Do you know more? luke.henriques-gomes@theguardian.com