Historical small social security debts are to be wiped, under new government measures being introduced. Photo: Julia Gomina.
Almost half of Australia’s social security debt backlog will be wiped and the threshold for waiving small debts increased, under measures just announced.
A $300 million package is being launched to invest in a range of measures aimed at improving Australia’s social security system to produce fairer outcomes.
The Federal Government will also roll out resolution payments of up to $600 for those Australians impacted by the historical debt calculation method known as income apportionment.
The threshold for waiving small, accidental debts will be increased for the first time in more than 30 years, from $200 to $250.
About 1.2 million debts are expected to be waived or will no longer need to be raised in 2025-26 as a result of the decision.
The administrative cost of recouping small, accidental debts is often higher than the value of the debt itself, making the debt recovery process uneconomical.
Social Services Minister Tanya Plibersek said the decision will mean Services Australia can spend more time on “significant matters” and “upholding the integrity” of the social security system.
“Our social security system is designed to be there for Australians when they fall on hard times, which is why it’s important that debt recovery processes must be fair and transparent,” Ms Plibersek said.
“This $300 million package will mean Services Australia does not waste time or resources chasing accidental debts that are uneconomical to recover, and spare Australians with small debts significant stress.
“It will also provide compensation for those affected by the historical practice of income apportionment, in recognition of clear evidence that it was invalid.
“When the system provides good outcomes for both recipients and taxpayers, all Australians win.”
Existing safeguards will be strengthened to ensure the waiver cannot be manipulated and will not be available in circumstances of significant non-compliance or fraud.
The minister said the government will continue to recover “every cent” of debt in those circumstances.
But people with legitimate historical debts affected by income apportionment from 2003 to 2020 will be eligible to apply for a resolution payment.
This is in recognition of the fact that this method of calculating entitlements is invalid.
To assist those affected in navigating the resolution scheme, Economic Justice Australia and the Australian Council of Social Service will each be given $400,000 in funding.
New legislation will be introduced into parliament in the coming weeks to implement these measures.
The legislation will also include a measure to provide legal clarity to the historical practice of income apportionment, which was in effect from the early 1990s to 2020, thereby avoiding the need to recalculate potentially millions of debts at a significant cost to Australia’s social security system.
Government Services Minister Katy Gallagher said it was important to remember that in many cases, income apportionment only changed the amount of debt owed by an individual by a small amount, and up to a third of those affected actually ended up with a lower debt.
She said income apportionment was never used by the Albanese Labor Government, but it is dealing with its legacy in a responsible and cost-effective way.
“The last thing vulnerable people need is to be hounded over small debts that are not worth the time or money to recover when there is far more important work our public servants could be doing,” she said.
“Delivering a fairer and more cost-effective social security system means learning from the mistakes of former governments.
“That is why we’re increasing the small debts waiver for the first time in more than 30 years and delivering payments for Australians affected by the income apportionment scheme.”
The Greens, however, are claiming some credit for the government’s announcement, saying they have long been pushing for the debts to be wiped.
They also want to see a six-year limit put in place for social security debt collection.
Greens Senator Penny Allman-Payne stated that the government still had work to do in improving the system and making it fairer for Australians.
“Like Robodebt, the income apportionment scandal has shown the systemic issues with the way our welfare system brutalises people living in poverty over ridiculous errors,” Senator Allman-Payne said.
“The work unpicking Robodebt is far from done. The Greens will continue to push Labor to implement the outstanding Robodebt recommendations, including the six-year limit on debt recoveries.”
