Services Australia spent AU$130m on contractors chasing robo-debts

The department used labour hire firms to track down debts it believed were due to be paid back by those in receipt of welfare.

Services Australia, the department responsible for Centrelink's Online Compliance Intervention (OCI) -- robo-debt -- initiative, has revealed it spent AU$129.5 million on labour hire arrangements.

Former Labor leader and now Shadow Minister for Government Services Bill Shorten called the labour-hire cohort an "army of debt collectors and banks" funded by public money to "hassle struggling Australians with inaccurate and illegal debt claims".

The figure was provided in response to questions on notice taken during Senate Estimates. The document also revealed that nearly-AU$130 million was dispersed among 612 labour hire staff in 2017-18, and 834 in 2018-19.

"The Morrison government used AU$130 million of taxpayers' funds to get private companies to pursue victims of its illegal robo-debt scheme to pay money they did not owe," Shorten said in a statement on Friday.

"Stuart Robert needs to front up today to explain what this AU$130 million was spent on and what other cheques he has signed off on to administer this illegal scheme."

The OCI program compares the income declared to the Australian Taxation Office (ATO) against income declared to Centrelink, resulting in debt notices, along with a 10% recovery fee.

The system had one large error where it would incorrectly calculate a recipient's income by basing fortnightly pay on their annual salary rather than taking a cumulative 26-week snapshot of what an individual was paid. 

Earlier this week, Shorten said relying on a computer algorithm was a stupid idea.

"It doesn't take into account that sometimes people are unemployed and people are employed … they have relied on a computer-generated program," he said, labelling it a "scandal".

"But what I've discovered in the last few months and now the courts have established, is it's actually illegal. In other words, the government didn't have the power to just rely on a computer program without checking it before they sent the letter of demand out to vulnerable Australians."

Regarding the claim that robo-debt provided the government with AU$1.5 billion in revenue, Shorten said "probably most of it" should be returned to the individuals who paid.

Services Australia last month confirmed that from 1 July 2016 to 31 August 2019 there had been 1,159,662 assessments initiated, resulting in the department raising a total of 617,018 debts, with an average bill of AU$2,630.

The number of debts reduced to zero up until August 2019 was 27,123, and the number of debts waived and/or written off permanently was 36,274. This figure was around 31,000 in May 2019.

The disclosure of this information followed the department admitting to 515 instances where it believed a debt was owed but the person was deceased. As a result, 442 of these instances were permanently written-off due to insufficient funds, and from the remaining 73, AU$225,406 was recovered.

Three of the 73 cases appealed their debt to an authorised review officer.

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

This followed the department revealing that 271,224 robo-debts were paid without seeking a review.

It is not known if customers were made aware that they could request a review of the debt that was determined through the use of the automated income-matching system, which has since been paused by the Australian government.

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