Over 22,000 tax refunds garnished this fiscal year by ATO for robo-debts

Based off nearly 175,000 Centrelink debts between financial years 2017-18 to 2019-20.

Services Australia has revealed that more than 22,000 welfare recipients had their tax refunds garnished by the Australian Taxation Office (ATO) as of 30 August 2019 to pay down debt raised, as part of its online income compliance program known as robo-debt. 

In response to questions on notice from Senate Estimates in December, the department revealed that nearly 20,000 tax refunds were garnished previously by the ATO during fiscal year 2018-19 and nearly 750 during fiscal year 2017-18.

Services Australia revealed that overall, nearly 175,000 tax refunds were garnished during the financial years between 2017-18 to 30 August 2019 to pay for all social welfare debts.

The department, formerly known as the Department of Human Services (DHS), added that, historically, about two-thirds of all tax refund garnishee actions occurred in the first 3-4 months of the financial year as it's the period when most people lodge their tax returns.

At the end of last year, Service Australia told Senate Estimates the lengths it went through to chase down debts it had regarded as owed. The department said of the 515 instances where it believed a debt was owed but the person was deceased, 442 were permanently written-off due to insufficient funds; and from the estates of the remaining 73, AU$225,406 was recovered.

Services Australia also said that from 169 robo-debts issued between fiscal years 2016-17 and 2018-19, when the department issued the debt notices and later found the recipient had died, AU$50,391 was the total value of the debts.

It also revealed that 271,224 robo-debts were paid without seeking a review.

Around the same time last year, the ATO appeared before the Senate Community Affairs References, revealing that the ATO relies on data provided by the DHS when taking money from a tax return.

"In our system, we have a flag that DHS told us they have a debt that they wish us to garnish if we do a refund. We give information when there's a refund due to DHS and DHS tells us at that time whether there's a debt they would like us to garnish," ATO acting second commissioner of client engagement Jeremy Hirschhorn explained.

The federal government pressed pause on the most controversial part of its welfare debt collection program last November, before conceding that in one case, major elements of its process were unlawful.

Minister for Government Services Stuart Robert said the move would ensure fairness and consistency for income compliance.

Just a week before the move, Robert was still defending the project.

"Using averaging as the basis to say to a citizen, 'There may be a debt, can you please engage with us?' is entirely appropriate," he told the National Press Club.

"And that process of using averaging -- using ATO tax receipts or end of the year assessments -- to say to Australians, 'There may be a problem, please engage with us' is absolutely appropriate and we have responsibility to do that."

Services Australia previously claimed its robo-debt error rate was around 1%.

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