Lawyers for the Department of Humans Services have admitted the government agency got it "wrong" when slapping a Melbourne nurse with a Centrelink 'robo-debt', during Federal Court action this week.

Madeleine Masterton, who received youth allowance payments while studying, and a second woman Deanna Amato are challenging the validity of the scheme- with the help of Victoria Legal Aid - after being hit with unexpected debts earlier this year.

The $4000 debt was at the centre of a Federal Court challenge to Centrelink's 'robo-debt' recovery scheme. Credit:AAP

On Friday, the DHS's legal team highlighted that Ms Masterton's $4000 debt had since been wiped, but sought further clarification on the women's case before handing over more documents pertaining to how the debt decisions are made.

“The Commonwealth has accepted, after we got helpful information from the applicant, ... [they] were wrong," Nicholas Owens SC said.