The Federal Government will expand Centrelink's automatic debt recovery program later this year to focus on aged pensioners and disability support payments.

Key points: Data-matching program set to focus on payments made to pensioners and the disabled

Data-matching program set to focus on payments made to pensioners and the disabled Commonwealth Ombudsman to hold meetings with welfare groups over program's impacts

Commonwealth Ombudsman to hold meetings with welfare groups over program's impacts Pensioner groups voice concerns over targeting of the elderly

Parliamentary Budget Office charts reveal the Government plans to use a similar data-matching program to save nearly $1.5 billion over four years.

The debt recovery program — which matches Centrelink and Australian Tax Office records — has issued nearly 170,000 notifications since July with thousands of Australians incorrectly told they owe money.

Labor's spokesperson for social services, Linda Burney, has called on the Government to suspend the program, which is being investigated by the Commonwealth Ombudsman.

"We have just learned this so-called debt system will be applied to people on their age pension so they can collect over $1 billion," she said.

The Ombudsman has scheduled meetings around the country this week to quiz welfare groups about the impacts of the project.

The ABC understands the compliance program for the aged pension and disability support payments will be automated later this year.

But the data-matching program will be based on assets and investments, rather than income data.

Budget papers reveal data matching activities with the Australian Taxation Office will be "expanded" in relation to age pensions and disability payments.

In mid-2016, the Government introduced changes to reduce the amount of human oversight and automate the compliance program, after a pilot program confirmed savings could be made.

The automated program has been criticised by the opposition, social service groups and welfare recipients who claim they being forced to repay debts they do not have.

In some cases, welfare recipients have been forced to repay $40 a fortnight despite still contesting their records with Centrelink.

Others have told the ABC they knew nothing about possible debts until being contacted by debt collectors, with notification letters sent to the wrong addresses.

Pensioners concerned about focus of program

Council on the Ageing chief executive Ian Yates said he had requested meetings with the Department of Human Services and the Government to discuss the data-matching program.

"We have no objection to the Government making sure people are only being paid what they should be paid," he said.

"But if the approach is not made in the right way then obviously, it can cause distress."

How the debt recovery system works: The system sends you a letter advising you of a potential welfare debt and asks you to review its figures online. It also sends an SMS

The system sends you a letter advising you of a potential welfare debt and asks you to review its figures online. It also sends an SMS When you log on you can update the information. You have 21 days from the date of the letter to go online and update

When you log on you can update the information. You have 21 days from the date of the letter to go online and update If you don't log on, Centrelink will make a default judgement its information is accurate. You will then be issued with a debt notice

If you don't log on, Centrelink will make a default judgement its information is accurate. You will then be issued with a debt notice If you do update the information, Centrelink may ask you to provide supporting documentation. This can include bank statements, letters from an employer, or payslips

If you do update the information, Centrelink may ask you to provide supporting documentation. This can include bank statements, letters from an employer, or payslips If you think the decision is wrong you can ask for a review

If you think the decision is wrong you can ask for a review If you or someone you know needs help, call Lifeline on 13 11 14

Mr Yates said he had not been contacted by pensioners concerned about the program and suggested the Government was trialling the data-matching program before focusing on pensioners.

More than 2.5 million Australians receive pension payments, according to the Department of Social Services' latest annual report.

Another 777,000 Australians receive disability support pensions.

Australian Council of Social Services spokeswoman Charmaine Crowe said the automated program was riddled with errors and should be suspended.

"Our concern is that people are paying back debts they do not owe or are paying back a debt that is much higher than what they owe," she said.

"Such occurrences could only be described as a substantial administrative failure."

Centrelink changes to ensure clients know before debt collectors

Labor's criticism of the program comes after Social Services Minister Alan Tudge announced a number of changes to the program, despite previously insisting it was working.

Mr Tudge has told his department to ensure welfare recipients can launch an internal review of their payments before debt proceedings are launched.

He will also ensure Centrelink clients are informed of discrepancies in their accounts before being contacted by debt collectors.

Letters will now be sent by registered mail so Centrelink can track whether they have been received.

In some cases, the letter will be followed up with a phone call.

Mr Tudge has also called on his department to simplify its language and ensure a contact number is printed on all notification letters, rather than being listed online.

Last week, Mr Tudge told the ABC the system was working and had identified close to $300 million in potential overpayments to welfare recipients.

Ms Burney said the changes were an admission that the program had failed and needed to be suspended.

"There wasn't even the Centrelink number on the notifications that went out to people who supposedly owe money, and they could not get the addresses right," she said.

In a statement, Department of Human Services spokesman Hank Jongen defended the program and said there was a legal requirement for welfare recipients to report changes in their circumstances.

"Initial notices request information to explain differences in earned income between the Australian Taxation Office and Centrelink records — these result in a debt in 80 per cent of cases," he said.

"The remaining 20 per cent are instances where people have explained the difference and don't owe any money following assessment of this updated information."