Listed below are direct extracts from the Royal Commission Report
(Note: Page references are from the PDF pages in the full version of the marked up Report. Headings below in BOLD are our inserted headings.)
Page 9 Preface
It is remarkable how little interest there seems to have been in ensuring the Scheme’s legality, how rushed its implementation was, how little thought was given to how it would affect welfare recipients and the lengths to which public servants were prepared to go to oblige ministers on a quest for savings. Truly dismaying was the revelation of dishonesty and collusion to prevent the Scheme’s lack of legal foundation coming to light. Equally disheartening was the ineffectiveness of what one might consider institutional checks and balances – the Commonwealth Ombudsman’s Office, the Office of Legal Services Coordination, the Office of the Australian Information Commissioner and the Administrative Appeals Tribunal – in presenting any hindrance to the Scheme’s continuance.
How the Robedebt scheme worked
Page 30 Overview
In summary, the Employment Income Matching measure entailed a process of data-matching and debt raising to be applied to some 866,857 instances of possible overpayment for the financial years 201011, 201112 and 201213 identified through a comparison of Australian Taxation Office (“ATO”) and DHS data. DHS would obtain information from the ATO as to what a benefit recipient’s employers had returned as the income earned by the recipient in the relevant financial year (“PAYG data”), compare it through an automated system with what had been declared to DHS by the recipient, and in the event of discrepancy would require the recipient to go online to explain it.
If the recipient did not respond or provide details which explained the discrepancy, or agreed with the PAYG data, the amount declared by the employer would be averaged across a period of time, which was often whatever employment period the employer had indicated.
… however, the basic premise was that the amount declared by the employer would be divided up evenly, and allocated into the number of fortnights included in the period being reviewed. (That process was variously referred to income “averaging”, “smoothing” or “apportioning”.)
Where, in any given fortnight, the averaged fortnightly amount exceeded the income the recipient was entitled to receive before reduction of benefit, it would be taken that there had been an overpayment, a debt would be raised accordingly and steps would be taken to recover it.
Where the recipient was still on benefit, deductions would be made from the income support currently being paid. Where the recipient was no longer on benefit, they would be required to enter a repayment arrangement. Debt collectors would be involved if they did not respond, and they were liable to have any income tax refund they were entitled to receive garnished.
Departures from previous DHS practice
There were five significant differences under Robodebt.
The first and major difference was that the PAYG data was to be regarded as the primary source of earned income information, which could be acted on to raise debts although unconfirmed by the employer or the recipient.
Secondly, where in the past compliance officers had engaged with recipients, examined the file and used powers under the Act to seek information from employers in order to determine whether a debt existed, now recipients were given a gross income figure with a period which might or might not accurately reflect the period worked, with the onus placed on them to provide details to contradict it, or have a debt and, prospectively, a 10 per cent penalty automatically raised against them.
Thirdly, where averaging had previously been used to arrive at a fortnightly income figure in limited circumstances and often with the agreement of the recipient that it gave a figure which reflected his or her actual income, the PAYG data averaged on a fortnightly basis for the declared period was now applied automatically where alternative information was not provided and accepted. That was despite the fact that entitlement to income support was to be determined under the Social Security Act 1991…
Fourthly, critical to achieving the predicted savings, where previously compliance officers had been involved, it was now anticipated that in most instances the entire process would be conducted online, the aim being to reduce (and preferably obviate) human involvement at the DHS end.
The fifth and final difference: where data-matching and consequent reviews had in the past been conducted on an annual basis, now recovery efforts would be directed over several years, going back some five years from the implementation of the program. (The measure was extended to include the 2013- 14 and 2014-15 financial years in the 2015 MYEFO, and the 2015-16, 2016-17 and 2017-18 years in the 2016-17 MYEFO.) This seems to have been based on a notion that because discrepancies in the hundreds of thousands had been identified in previous financial years there must also be debts in the hundreds of thousands of dollars in those years awaiting recovery; ignoring the facts, firstly, that a discrepancy did not necessarily indicate an overpayment and secondly, that the 20,000 or so files involving discrepancy which had already been reviewed for each of those years had probably already yielded the bulk … of the overpayments in those years.
Assumptions and legality
Page 32 Overview
“In subsequent internal legal advice, there seems to have been an assumption that if averaging resulted in a debt, it could be assumed that the recipient must have failed to inform DHS of a change in their income. That was an extraordinary assumption. The notion that averaging without more could prove a debt was unsound in the first place, but to charge a penalty required a conclusion that the recipient had committed a breach of the Social Security (Administration) Act by failing to report a change in income, and required correspondingly compelling evidence to justify it. That seems not to have crossed anyone’s mind.
Those were respects in which the Scheme was devised without regard to the social security law. More fundamentally, the way averaging was used in the Scheme was essentially unfair, treating many people as though they had received income at a time when they had not, and did not need support when they did, with the further fiction that they now owed something back to the government.
It subverted the rationale on which income support was provided in the first place: as a safety net to ensure that people received help when they most needed it.
There were other fundamental unfairnesses in the program. No regard was had to the sheer unreasonableness of placing the onus on recipients to attempt to establish what their earnings were for periods going back as long as five years when they had been given no reason to expect anything of the kind at the time they declared their income and received their benefits.
Page 34 Overview
In 2018, the Ombudsman again raised concerns about the legality of averaging but was fobbed off with explanations that it involved the best available evidence and was only used where the customer had not taken the opportunity to provide information.
The cover-up continued.
Page 35 Overview
This involved reimbursement of $746 million to some 381,000 affected individuals and writing off debts amounting in total to $1.751 billion. In November 2020, on the day it was set for trial, the government settled the class action.
Robodebt was a crude and cruel mechanism, neither fair nor legal, and it made many people feel like criminals. In essence, people were traumatised on the off-chance they might owe money. It was a costly failure of public administration, in both human and economic terms.
History of the Scheme: 2015-2016
1 The Robodebt scheme
The Australian system of government includes a number of checks and balances, protections against abuses of power, and mechanisms for external oversight and scrutiny. Ministers bear responsibility for their portfolios; secretaries have duties and responsibilities with respect to the departments they administer; and public servants have standards of conduct to which they must adhere, which include acting with care and diligence, integrity and, importantly, providing the government with advice that is frank and honest.
How, then, in such a system, did it come to pass that the government implemented, and continued, an unlawful scheme that has been described as a “shameful chapter in the administration of the Commonwealth social security system” and “a massive failure of public administration”?
3 How did this happen?
The environment in which the development of what would become the Scheme occurred was fraught. It was characterised by a powerful drive for savings, strongly expressed ministerial policy positions, cultural conflicts on an inter and intra-departmental level and intense pressure experienced by public servants, including those in positions of seniority.
The description of the PAYG proposal in the NPP that was submitted to the 164 (ERC) on 25 March 2015 contained no material change from the draft NPP amended on 27 February 2015. The version that was submitted to the ERC omitted any explicit reference to the use of income averaging and contained the representation that “there would be no change to how income is assessed or overpayments calculated as part of this proposal.”
In fact, what the pilot revealed was alarming. If the results of the pilot were replicated once the Scheme was implemented at full scale, it could be expected that 60 per cent of the interventions that were planned for the Scheme would involve debts being raised against recipients which were probably inaccurate, because they were based on averaging.
The failure to confront fundamental flaws in the operation of the Scheme appears to have been a product of the culture within DHS at the time.
At the level at which decisions about the Scheme were being made, attention was entirely centred on implementing it to ensure it achieved “success,” measured in terms of the numbers of reviews completed and the amount of savings achieved. The focus was on how to do this. There was no critical analysis or reflection on whether it should, or even could, be done. The alarm bells were ringing loud and clear for anyone who cared to listen, but they were falling on deaf ears.
Throughout 2016, the intense pressure applied by senior management had resulted in reports to the minister of the resounding success of the measures, through the achievement of unprecedented numbers of compliance reviews and subsequent savings success. The staff concerns and system problems that had arisen throughout the period prior to December 2016 formed no part of the briefings to the minister, which instead provided information to support his public promotion of the success of the measures.
History of the Scheme: 2017
The beginning of 2017 had all the hallmarks of becoming a watershed moment for the Robodebt Scheme (the Scheme). In the first few months of the year, the chorus of criticism was deafening. The usual checks and balances on government power were swinging into action, and it seemed the Scheme would be subjected to scrutiny and evaluation by bodies external to the Department of Human Services (DHS). The unfairness, probable illegality and cruelty of the Scheme were publicly laid bare. All signs pointed towards the possible abandonment or, at the very least, drastic revision of the Scheme as it was operating at the time.
Given the circumstances, one of the most remarkable aspects of the Scheme’s saga is how it continued,…
On 10 January 2017, it was brought to Mr Tudge’s attention that a “long-time Centrelink worker who was working in income reviews and eligibility assessments” had spoken to a journalist about problems with the income compliance system. The Centrelink worker described warnings from her colleagues to DHS officers that “computer-based data matching would lead to incorrect debts being issued and a lot of problems.” Less than 15 minutes later, Mr Tudge had dictated written comments to be provided to the journalist in response. None of these comments addressed the issue of incorrect debts.
A summary of the communication from the whistle-blower explained that debts raised under the Scheme were frequently inaccurate for a number of reasons. It stated:
The summary described the raising of debts that were “incorrect” and outlined the five main system errors that caused the debts to be incorrect, which were:
- doubling up of income due to errors in the correct identification of employers or income types,
- the inclusion of non-assessable income which should be excluded from the assessment,
- incorrect calculation of the amount of payments made to recipients,
- the application of a recovery fee in circumstances where it should not be applied, and
- directions to compliance officers which had the effect of inhibiting their ability to correct errors.
In particular, it was said, “Centrelink officers are not allowed to check the results of the automated system against evidence previously provided by the person or their employer….”
Response to staff concerns
The fact that it was recognised as necessary to introduce a manual check demonstrates that the response in the media statement, which dismissed the whistle-blower’s claims as “incorrect,” and made no mention of any known issues with the system, or any steps being taken to address them, was specious. The manual check was also tacit confirmation of the validity of some of the staff concerns that had been raised with the system.
10 The 10 per cent penalty fee
In her December correspondence to Mr Tudge, Dr Goldie had raised a concern about the “routine” imposition of a 10 per cent “recovery” fee. That was a reference to the application, by the department, of a penalty fee, euphemistically called a “recovery fee,” in circumstances where a compliance review resulted in a debt.
The Commission is aware that a number of people who had alleged debts raised against them under the Scheme have died by suicide. While each of those deaths may have prompted an internal review of the particular case, they did not galvanise either DHS or DSS into a substantive or systemic review of the problem of illegal, inaccurate or unfair debt-raising.
Deceiving the Ombudsman
2 The Commonwealth Ombudsman’s inquiry
The investigation by the Commonwealth Ombudsman in early 2017 into the Scheme was a significant event. The scrutiny of the Scheme by an independent body, invested with investigatory and reporting powers, gave rise to the potential for its flaws and illegalities to be brought to light and for serious consideration to be given to the viability of the Scheme’s continuation.
What is examined in this part of the report is the chronology of how two government departments acted to deceive the Ombudsman’s office, avoid effective scrutiny of the Scheme and, in doing so, thwart one of the best opportunities that existed to bring the Scheme to an end.
The DSS explanation was dishonest. The assertion to the Ombudsman that, in developing the measure, “DHS took DSS’s concerns into account and made adjustments to the process” was plainly false.
DSS attempted to and did conceal critical information from the Ombudsman and represented that the Scheme was lawful.
2.11 Human Services’ chief counsel is made aware of the deception of the Ombudsman and takes no action
Further, the 2017 legal advice used language suggesting that it was highly qualified and legal reasoning which Ms Musolino, an experienced lawyer, must have known was highly questionable.
Despite this, Ms Musolino took no steps to provide legal advice to DHS executives as to the extent of that risk and the need to obtain independent external advice. She did not do so because she knew that such advice was unwanted by them.
While DSS was engaged in conduct designed to avoid providing the Ombudsman with the 2014 DSS legal advice, DHS was also avoiding giving responses to inconvenient requests for information from the Ombudsman and taking an approach designed to obtain validation of the DHS narrative about the Scheme.
Some of those examples represent concerning behaviour by certain DHS staff, who demonstrated an alarming readiness to mislead the Ombudsman and conceal information that was detrimental to the narrative DHS was determined to sell.
However, Mr Tudge knew that the Scheme was issuing inaccurate debt notices, including in circumstances where a process of averaging of income was used to calculate a debt. He also knew that a significant proportion of recipients had not entered information into the system, and that those debts were likely to be inaccurate.
One way in which DHS recovered debts from current recipients was to withhold part of their social security payments. Under the Scheme, income support recipients were given 28 days after a notice of their debt was issued to enter into a repayment arrangement before withholdings were automatically applied to their income support payments.
2.6 The use and threat of garnishee notices
Services Australia has the power to issue garnishee notices to third parties to recover part or whole of a social security debt. Former recipients’ tax refunds and savings, employment income, income from “a less common source such as a property settlement,” or compensation which they have received can all be garnished.
Throughout the Scheme, DHS issued garnishee notices to the ATO and to financial institutions. Some of those notices were generated by a manual process, but the vast majority were generated automatically.
2.7 The use of Departure Prohibition Orders
A Departure Prohibition Order (DPO) is an order which prohibits a person from departing Australia for a foreign country if they have failed to repay a debt to the Commonwealth. The Commission received evidence from persons affected by the Scheme about how the threat of a DPO affected the way they responded to the debt, and how it affected their wellbeing.
DHS and the ATO
The Robodebt Scheme (the Scheme) was underpinned by a data-matching program involving the Australian Taxation Office (ATO) and the Department of Human Services (DHS). The program was designed to identify former and current income support recipients with alleged discrepancies between their earnings as reported to DHS and their employment income annually reported by employers to the ATO.
5.5 Lack of governance and controls
Dr Wurth reported that there was a lack of proper governance, controls and risk management measures in place under the Scheme. She found the governance, controls and risk management instruments were inadequate to ensure PAYG program compliance with the Framework Documents…
The Commission has doubts as to the correctness of that proposition. Given the protective object of section 355-25 of TAA53, it seems strongly arguable that an ATO officer could not be lawfully satisfied that the use of the information disclosed to DHS was “for the purposes of administering…the social security law” without being informed by DHS of how the information was to be used. It is open to doubt that the ATO was so informed with respect to the Scheme. Mr Hirschhorn of the ATO told the Commission that:
…the ATO had not taken any specific steps to assure itself that every use of the information was lawful under social security law…
And, as already detailed, the ATO’s attempts to better inform itself about the Scheme were frustrated by a lack of transparency from DHS, and the 2004 Protocol did not, at that time, accurately describe the use by DHS of the information disclosed by ATO.
In these circumstances, the Commission considers that there is a serious question as to whether information was lawfully disclosed by the ATO to DHS for the purpose of data matching under the Scheme.
5.7 Possible privacy breaches
The evidence before the Commission also suggests that there may have been breaches of the APPs under the Privacy Act, in relation to disclosures/collections by the ATO and DHS for the purpose of data matching in the Scheme.