The anaemic report by the Commonwealth Ombudsman on the Services Australia: Income Compliance Program (aka the RoboDebt disaster) states
The Office of the Commonwealth Ombudsman (the Office) has had an ongoing interest in the Income Compliance Program (IC Program) since its commencement in 2015. At the time of its commencement, the IC Program was administered by the Department of Human Services. On 29 May 2019, the Department of Human Services was renamed ‘Services Australia’ and on 1 February 2020, Services Australia was formally established as an Executive Agency. For ease of reference, this report will refer to Services Australia as the responsible agency for the administration of the IC Program.
In April 2017, the Ombudsman published the report, Centrelink’s Automated Debt Raising and Recovery System (the 2017 report). The 2017 report highlighted systemic issues with the IC Program, including problems with fairness, transparency and usability of the IC Program’s online system and found that many of these issues could have been avoided by better project management, design, user testing and support for users of the online system. The report made eight recommendations aimed at improving Services Australia’s administration of the IC Program, all of which were accepted by Services Australia. The recommendations focused on:
• written and online communication with customers
• assistance for customers to gather income information in limited circumstances
• service delivery and support for vulnerable customers
• review of recovery fee decisions
• staff communication and training
• complaint information–capturing and using complaint information for continuous improvement
• program evaluation (including how to further mitigate the risk of over-recovery of debts) and an incremental approach to any further rollout.
In April 2019, the Ombudsman published a follow up report, Centrelink’s Automated Debt Raising and Recovery System (the 2019 report). That report reviewed Services Australia’s implementation of the recommendations made in the 2017 report. The 2019 report found that Services Australia had made significant progress in implementing the recommendations, and made further recommendations aimed at improving correspondence and messaging to customers about the application of recovery fees and use of averaged Australian Taxation Office (ATO) income information in raising debts.
Changes to the Income Compliance Program
In early 2019, the Department of Human Services was renamed as Services Australia and became part of the Social Services portfolio. On 19 November 2019, the Australian Government announced that Services Australia would no longer use averaged ATO income information without other proof points to raise debts under the IC Program. In an update on its media hub on the same day, Services Australia advised that it would make contact with individuals for whom Services Australia had used ‘only income averaging’ to raise a debt and would provide advice to those individuals about ‘freezing’ repayment arrangements while it reassessed debts.
This announcement was closely followed by Federal Court of Australia consent orders on
27 November 2019 in the matter of Amato v The Commonwealth of Australia (VID611/2019) which declared, among other things, that averaged ATO income information was not capable of satisfying a decision-maker that Ms Amato owed a debt within the scope of ss 1222A(a) and 1223(1) of the Social Security Act 1991.
In light of the changes to the IC Program in November 2019, the Ombudsman decided to commence an own motion investigation, pursuant to s 5(1)(b) of the Ombudsman Act 1976 (Ombudsman Act), into Services Australia’s use of averaged ATO income information in its income compliance program. The Ombudsman formally notified the then-interim Chief Executive Officer of Services Australia of his decision on 19 February 2020.
On 29 May 2020 the Australian Government announced that it would refund repayments made on debts based wholly or partially on income averaging of ATO data. In addition, Services Australia subsequently announced that any outstanding debts based wholly or partially on income averaging would be reduced to zero. Following that announcement, our investigation focussed on the implementation of the refund process. For ease of reading, this report refers to the ‘refund’ process, recognising this process incorporates both debts that have been paid being refunded, as well as debts which remain outstanding being reduced to zero.
Objective and scope of our investigation
The Ombudsman limited the scope of this investigation to the administration of the announced changes to the IC Program, and in particular to seek assurance that Services Australia’s processes for identifying and refunding debts raised using income averaging was, and continues to be, fair and transparent.
In order to ensure we did not duplicate or prejudice legal proceedings that were underway at the time of our investigation, we determined the question of the lawfulness of the income averaging methodology previously employed by Services Australia would be out of scope of our investigation.
Rather, the scope of this investigation is fundamentally concerned with the adequacy of the arrangements that Services Australia put in place to ensure that those hundreds of thousands of Australians who were subject to debts on ‘legally insufficient’ grounds have those debts refunded.
During the course of our investigation, we identified some issues and concerns with the identification process which have now been overtaken by the refund process itself. These matters are described and subject to comment in this report but require no immediate action by Services Australia.
While the refund process is nearing its completion, we also identified some matters where we consider that more still needs to be done to reasonably complete the task, as well as other matters relating to the ongoing administration of the IC Program. These matters are subject to recommendations in the report.
In July 2019, the Senate Community Affairs References Committee (the Senate Committee) commenced an inquiry into the IC Program, which focused on the impact of the IC Program, income averaging methodology and the legality of the debt collection processes. Our Office made a submission to the inquiry in September 2019 and a supplementary submission in September 2020. Our supplementary submission outlined our previous interest in the IC Program and some of the issues we identified during the earlier part of this investigation. A copy of this submission is at Appendix A to this report.
Methodology
Our Office engaged with Services Australia a number of times between November 2019 and November 2020 about the IC Program and our investigation. We also sent questions and requests for information to Services Australia under s 8 of the Ombudsman Act.
In addition, our Office investigated a number of individual complaints about the IC Program which raised issues including communication, availability of records, delays in reassessments and reviews, interest charges, access to advance payments and bankruptcy which also formed the basis of this report.
The analysis of the investigation and our recommendations and comments are based on our assessment of the material provided by Services Australia and the issues we saw in individual complaints we investigated.
During the investigation, Services Australia was still developing its identification and refund processes. The Office made a number of inquiries to Services Australia throughout the investigation and we acknowledge that Services Australia undertook a significant amount of work to provide our Office with a high volume of information.
Our role
The Office investigates complaints and provides independent oversight of public administration by Australian government agencies and certain private sector businesses. The Ombudsman makes recommendations to improve government administration.
The Ombudsman cannot be directed to undertake an investigation, to arrive at a certain conclusion or on the scope of an investigation. Rather, the Ombudsman decides what is in or out of scope of his investigations in accordance with his statutory function as set out in the Ombudsman Act.
The Ombudsman’s role is limited to investigating ‘action that relates to a matter of administration’. Accordingly, our focus is on the administration or implementation of legislation and policy by officials in government departments and statutory agencies.
Recommendations and comments
The Office makes nine recommendations for action to Services Australia.
Recommendation 1
As soon as it has completed identifying all individuals who are and are not eligible for a refund, and without duplicating communication that may be required as a result of legal proceedings, Services Australia should communicate directly with individuals who have had debts raised under the IC Program and who have not been assessed as eligible for a refund or removal of their debt. That communication should be in writing and include clear advice about the individuals’ review rights.
Recommendation 2
If it is anticipated that Services Australia may re-raise debts that have been refunded, it should, at the earliest opportunity, publish general information on its website to enable individuals to understand that the Australian Government’s decision to refund eligible debts does not preclude Services Australia from raising another debt for the same debt period without relying solely on income averaged information.
Recommendation 3
In circumstances where Services Australia decides to revisit and potentially re-raise refunded debts it should, at the earliest opportunity, write to affected individuals and provide information to enable them to understand the impact of its decision. This information should include:
a) the basis on which any decision to revisit and re-raise debts will be made
b) an assurance that income averaging alone will not be used to re-raise debts c) information about individuals’ review rights.
Alternatively, if Services Australia does not intend to revisit and potentially re-raise debts which have been the subject of refunds, it should confirm this publicly at the earliest opportunity.
Recommendation 4
Services Australia should continue to identify options to resolve the issue of individuals’ debts having been affirmed by the AAT with income averaging in the final decision, ideally with a view to refunding those debts which would otherwise have been eligible for refund as soon as possible.
Recommendation 5
Services Australia should review its guidance to staff, including all relevant policies, procedures and training materials, to ensure it aligns with Services Australia’s stated position that where an individual requests a formal or ARO review, their request is referred directly to an ARO. (
Recommendation 6
In circumstances where Services Australia is unable to obtain income information from the individual or third parties for the purposes of an SME review, it should finalise the review based on evidence other than averaged ATO information on hand and provide a decision to the individual.
Recommendation 7
Services Australia should only rely on ‘net to gross converted income information’ from bank statements in income compliance activity, in the absence of other proof points, with express confirmation from individuals that the grossed up amount accurately represents their fortnightly earnings for the relevant period.
Recommendation 8
In circumstances where Services Australia continues an individual’s income compliance in- flight review and where the individual had previously been contacted about an income discrepancy, Services Australia should include in its written communication a correction to any information provided in the initial correspondence that is no longer accurate.
At a minimum, the correspondence should note that Services Australia made changes to the IC Program in November 2019, and that it will no longer raise debts relying solely on estimating the person’s income by ‘averaging’ ATO income information over multiple fortnights. (
Recommendation 9
Whenever Services Australia is requested by an individual to review a debt raised pre-2015 it should explicitly consider whether income averaging was used, following the same manual process it undertook for the refund process for the IC Program. If it identifies that income averaging was used as the sole basis for any portion of the debt, it should reduce that portion of the debt to zero, regardless of when that debt was raised. If the individual has repaid that debt and has no other debt owing to Services Australia, that payment should be refunded.
Services Australia should ensure its website clearly identifies the availability of this process, how a person can request it, and the person’s options for further review should they be dissatisfied with the initial decision.
The Office also makes a further seven comments to Services Australia about matters that have occurred, but where due to the passage of time, no remedial action is required. These comments sit alongside our formal recommendations.
Comment 1
In order to mitigate future risks and minimise adverse impact upon affected individuals, Services Australia should have recorded appropriate indicators on individuals’ records to capture the method of calculating debts, allowing timely identification of, as well as reporting on, debts which relied wholly or partially on income averaging.
Services Australia should have recorded, for each debt raised on an individual’s file, the basis on which it was raised, including whether it relied wholly or partially on income averaging or whether other ‘proof points’ were relied on, and if so which ones.
Services Australia should have recorded, on each debt it considered, the basis on which it categorised the debt as being raised using income averaging or not.
Comment 2
In light of the 19 November 2019 announcement by Government that averaged ATO income information alone is ‘legally insufficient’ to raise a debt, the more appropriate approach would have been for Services Australia to be able to immediately freeze recovery on all income compliance debts while it conducted its identification process, only re-starting recovery once a debt was determined to have not been raised relying on income averaging.
Comment 3
In light of the risks associated with accepting an individual’s ‘agreement’ to averaged income amounts, Services Australia should have immediately frozen recovery on ‘agreed to’ debts.
Comment 4
Services Australia should have taken more proactive steps to ensure that any individual seeking an advance payment was not prohibited from doing so by a debt Services Australia had determined was ‘legally insufficient’.
Comment 5
Services Australia should have communicated directly with all individuals who had debts raised under the IC Program immediately after the November 2019 announcement. This communication should have informed individuals that Services Australia was reviewing debts, the impact on outstanding debts (ideally, consistent with our earlier comment that debt recovery action had been frozen), that individuals did not need to take any action and would be contacted within an indicative timeframe.
Comment 6
While we are satisfied with the steps Services Australia has now taken, it should have taken more proactive steps from November 2019 to identify individuals with private payment arrangements relating to a debt which had been frozen, and contact all individuals within the cohort to ensure they were aware of their entitlement to pause the arrangement.
Comment 7
Following the 29 May 2020 announcement, Services Australia communicated extensively about the Australian Government’s decision to refund debts, including through a wide range of mediums to communicate with affected individuals and with instructional materials for staff. We are satisfied Services Australia took appropriate steps to communicate with individuals eligible to receive a refund during this period.