Govt settles robodebt class action, agrees to pay $112m in compensation

The federal government will pay out $112 million in compensation to 400,000 welfare recipients who had debts unlawfully raised under its robodebt program after settling a class action.

Law firm Gordon Legal announced a landmark settlement worth $1.2 billion on Monday – the day the class action had meant to go to trial – pending the approval of the Federal Court.

In a statement, it said the government had agreed to pay $112 million in compensation to the approximately 400,000 class action members, including any legal costs.

The compensation is on top of the $721 million in debts that were raised using income averaging that the government is currently repaying.

As at the end of October, Services Australia had already repaid almost $700 million, or approximately 94 percent of all refunds.

A settlement distribution scheme will see that all amounts owed to group members paid by the end of 2021.

The government has also agreed to “drop claims for approximately $398 million in debts it had invalidly asserted against group members of the class action” as part of the settlement.

Gordon Legal noted that “in settling the class action, the Commonwealth has not admitted that it was legally liable to group members”.

Partner Andrew Grech acknowledged the courage of six lead applicants, who “led these proceedings on behalf of all robodebt victims”.

He also thanked on behalf of the firm’s clients Shadow Government Services Minister Bill Shorten for his “relentless pursuit of this issue”, as well as Victoria Legal Aid for bring individual claims before the class action began.

In a separate statement, Shorten described the settlement as a “last minute, pre-trial admission conceding [the government] owes robodebt victims their money back plus compensation”.

He also said the settlement was the “most costly and involves the most people of any settlement by an Australian Government", while again calling for a Royal Commission into the scheme.

Robodebt, officially known as the income compliance program, was introduced by the then Department of Human Services in 2016 to replace parts of a formerly manual debt-raising process.

The system automatically matched earnings reported to Centrelink against employer-reported income data held by the ATO, with individuals asked to explain any discrepancies.

But in November 2019, the government was forced to change the way debts were raised after a Federal Court ruling found the robodebt process failed the evidence test at its first hurdle.

Services Australia is now planning to match the data of welfare recipients against single touch payroll data in a bid to simplify income reporting obligations.