The Commonwealth government has conceded one robodebt was invalid due to the use of income averaging in the absence of concrete evidence — the exact system it suddenly abandoned last week after insisting for years it was built on solid legal ground.

It seems that rather than strong legal advice, which is easy for governments to obtain, the abandoned income-averaging system was based mainly on something more like wishful thinking.

In a landmark Federal Court case brought by Victorian Legal Aid on behalf of Deanna Amato, the Commonwealth’s lawyers have laid down their arms and agreed Centrelink had no right to demand payment of the debt, initially of just under $3000, or add a 10% penalty charge later. From there it follows that a request to the Australian Taxation Office to seize up to $3,215.38 from Amato’s tax return was also unlawfully made.

She says the first she knew of the debt was when her full tax refund of $1709.87 was seized as the letters went to her old address, and she had no obligation to update Centrelink when she moved because she was no longer a client.

Our client Deanna says she’s thrilled that the outcome of her test case will help other people with #robodebts. The case has helped pave the way for a smarter, fairer social security system that people can trust. @ACOSS @not_my_debt https://t.co/mcOetoF3VN pic.twitter.com/EsHjfcdl12 — Victoria Legal Aid (@VicLegalAid) November 27, 2019

Legal Aid Victoria’s executive director of Civil Justice Access and Equity, Rowan McRae, said there were hundreds of thousands of Australians who received or paid off robodebts based only on income averaging.

“Today’s result shows the has accepted what advocates have been saying for years – using only income averaging to raise debts is both inaccurate and inconsistent with the Social Security Act.” she said in a statement.

While the government settled other cases out of court, this time its change of position meant the court ruled by consent that the Centrelink decision-maker was not in possession of sufficient information to establish that the debt existed or to justify the addition of the 10% penalty.

The debt was revised down by several hundred dollars after a review earlier this year but the court found that was not based on solid information either. After the court proceedings began, another review of the case led Centrelink to the conclusion that Amato still owed a debt, but “it was different and very substantially smaller” than the amounts it had previously demanded, according to the ruling.

The brief yet historic Federal Court decision shows the government was also ordered to pay the costs and $92.06 in lost interest for the period it held onto Amato’s money.

“Getting rid of the averaging element of the system is a giant leap forward – my debt was raised because of this averaging, and it’s now so obvious how incorrect it can be,” she said.

“I had my money refunded to me but I hope that others who have chosen, or been forced to pay back dodgy debts will also have a way to get their money back.

“I feel a weight lifted off my shoulders. I’ve proven my innocence, but also proven that there are reasons why you need all the facts before you can demand debt payments from people. Especially when those people were coming to you for help in the first place.”

Last week, Government Services Minister Stuart Robert preferred to describe the abandonment of income averaging as merely a “refinement” of the robodebt process, but it was widely interpreted as a move to avoid being on the wrong side of several legal challenges including Amato’s and a class action lawsuit on behalf of a large number of robodebt recipients, which continues despite last week’s changes.

The minister refused to apologise or admit that any mistakes had been made in a later press conference and denied there was any “change to the construct of the onus of proof” but it appears there has been.

Previously Centrelink believed it could use income averaging alone to calculate debts as long as it had asked the alleged debtor for more detailed information about their past income, and they had been unable or unwilling to provide it. That seems a lot like shifting the burden of proof onto the supposed debtor and since last week, the agency has stopped doing that and begun a review of all past debts raised in such a manner.