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The Centrelink welfare debt crisis engulfing the Department of Human Services has been affecting Aboriginal Australians, with NITV receiving more than one hundred claims from people saying they have received of demands for repayment despite correctly reporting their income.
Robert Burton-Bradley

4 Jan 2017 - 4:37 PM  UPDATED 4 Jan 2017 - 6:43 PM

Indigenous Australians have fallen victim to the growing Centrelink debt notice scandal, in which hundreds of thousands of people have received official letters demanding welfare money be repaid; only many of the alleged ‘debts’ have turned out to be wrong. NITV News has been inundated by stories from more than 100 people claiming they were erroneously told they owed Centrelink money. 

Since July 2016, a total of 170,000 debt recovery notices have been sent out to Centrelink recipients informing them they had committed fraud for underreporting their income and demanding they pay back thousands of dollars or face debt collectors. In some cases, the alleged outstanding balances exceeded $20,000.

Rachel Singe’s husband Travis received a letter demanding $23,000 from Centrelink in 2016, claiming the couple had not reported their income correctly.

“We went through all our tax reports and payslips and were told that he had not reported properly when he was working casually, even though we both reported every fortnight and usually reported that we had earned more than we actually did,” she told NITV News.

“It's so frustrating when you do everything by the rules and get a higher paying job so you no longer need Centrelink payments, and then get stung with a fine like this.”

The demands for non-existent debts come as a result of a new information sharing agreement between Centrelink and the Australian Tax Office (ATO), which is averaging people’s annual income across a whole year. Periods where people reported no income have now been incorrectly recorded against them by Centrelink as income earning periods.

The algorithm used is unable to differentiate between fortnightly reported income and the total income earned in a financial year. It’s been reported that no one at Centrelink foresaw the problems this would create.

School teacher Nicholas Kuilder received Newstart payments for 6 months in 2012 while looking for new work after relocating to a new city. Once he obtained work he cancelled Centrelink and thought nothing more of it.

“I then receive a letter claiming I owe Centrelink over $3800 from that financial year,” he told NITV News.

“This didn't seem right as I always reported my income correctly and was pretty diligent with my paperwork.

“Once I was able to get a hold of someone, I spoke with a person who seemed to have the ‘guilty until proven innocent’ stance, they were incredibly hostile over the phone.”

Nicholas had to wait another two weeks before he could get someone on the phone.

“We then found that the fault in the problem was that their system did not recognise that the schools I was reporting as having worked at all fell under the banner of the Department of Education, and were not separate ABN's from my Payslips. So essentially, they had doubled all of my reported earnings from the time I was on Centrelink,” he said.

“They also did not take into account that I was only on Centrelink for 6 months and that the previous 6 months were where a majority of my earnings from the financial year took place.”

Department of Human Services General Manager Hank Jongen told NITV News the letters were not debt demands.

"When data differences are detected, the system generates a letter (this is not a debt letter) advising people of the difference and asking them to either confirm or update their details online using myGov," he said in a written statement.

"If the employment income was earned before they began receiving or after they stopped receiving income support payments, then they will not incur a debt."

He also said that a majority of claims had been able to successfully resolved through Centrelink, but did not say in how many cases Centrelink had wrongly calculated a discrepancy using ATO data.

"Over 70 per cent (72 per cent) of people who received an online compliance letter since September this year have completely resolved the matter," he said. 

Many people said they had repaid debts they did not owe because the challenge of going back over many years of tax returns and pay slips was either too much or they found the Centrelink process for challenging the debt extremely difficult.

Daniel Hayes told NITV News he was halfway through repaying the debt when he started seeing news articles about the debt scandal. He has since stopped paying Centrelink.

“I’m in the middle of repaying them $3350 for apparently not declaring correctly in periods where I didn’t even have a job. When I asked for proof, they told me I had to go through my bank records, so I’ve paid it for a year down to $1600,” he said.

Other people reported receiving Centrelink payments during part of the year and correctly declaring, then going off Centrelink once they found work. Because that work occurred in the same financial year as the Centrelink payments, the new algorithm has taken that income and averaged it out evenly, so it appears recipients had earnings whilst receiving Centrelink payments. The result is a demand for a debt that never actually existed.

Davis Darren is seeking legal advice after receiving a debt notice for $2,500 for allegedly failing to declare income for periods he was not working.

“The dates they say I failed to declare I wasn't actually working, and they are impossible to call and deal with. I don't have time during the day to go to a centre due to working. I don't understand why this has come up four years later,” he told NITV News.

Michelle Lotarski was hit with a staggering $25,000 debt demand relating to her parenting payment over a period of three years.

“In 2011 I was working part time when I made a parenting payment claim. There was no problem and I started receiving payments,” she said.

“They told me at my first interview for claim that I only had to provide my payslips and an estimate earned for the year. I submitted my tax each year, did Centerlink’s annual income estimate each year, was getting paid fine for three years, then all of a sudden I received my outstanding debt of a massively scary $25,000.”

The Department of Human Services which has responsibility for Centrelink is organising "Advanced Customer Aggression Training" according to a tender it put out late last year, due to the huge number of complaints it was receiving.

Christian Porter, Minister for Human Services, said on Tuesday that the new system was working well, with only a small number of complaints. He added more than $300 million had been recovered from welfare recipients.

"The complaint rate is running at 0.16 per cent... only 276 complaints out of 169,000 letters, and that process has raised $300 million worth of money back to the taxpayer," he told ABC Radio on Tuesday.

He did not say how many disputes, rather than complaints, had been lodged or how much of that $300 million was wrongly claimed as debt by the new system.

"In 80 per cent of instances the debt is repayable to the Commonwealth. In the final 20 per cent of instances the matter is resolved generally by speaking to people, simply providing information online," Mr Porter said.