The government is looking to ground up to 200,000 people who owe Centrelink money in their attempts to recoup Australia's $3.5 billion welfare debt.

The travel ban will come into effect on January 1.

It only applies to people who are no longer receiving payments from Centrelink and owe money, but refuse to repay it.

They may also be slugged with an 8.74 percent interest rate on their debt.

Department of Human Services general manager Hank Jorgen says Centrelink will be reminding former welfare recipients of their debt before any interest charges are slugged.

Department of Human Services general manager Hank Jorgen says those who are affected should call Centrelink if they are concerned about not being able to go on an upcoming holiday (Source: A Current Affair)

"We'll be reminding them of their debt," Mr Jorgen told A Current Affair .

"We'll be outlining to them the range of options that they have available to them to repay the debt and they'll have a period of 28 days to respond before we start imposing those interest charges.

"Basically, these are a range of measures which enable us to contact people, remind them of that debt and ensure that they take appropriate action to repay the debt or enter into an appropriate arrangement."

Mr Jorgen says those with welfare debts who are worried about how the changes will affect them shouldn't panic and instead should contact Centrelink before they plan to travel.

Those on Newstart allowance won't have travel bans imposed, but their payments will be stopped while they are overseas.

Centrelink are set to impose travel bans on the up to 200,000 people who owe Centrelink money (Source: A Current Affair)

"This is not a measure aimed at recovering debt. The suspension of payments is simply one of the rules," Mr Jorgen said.

But Australian Unemployed Workers Union president Owen Bennett believes the government is taking the wrong approach to getting people back in the workforce.

"It's really Centrelink that need to be fixing their own books and they shouldn't be trying to shift the blame onto unemployed workers, which is what they are doing now and what they have always done in my opinion," Mr Bennett told A Current Affair .