- Almost half a million debts will be waived or refunded by the Government
- The computer-generated demands for payment will be refunded if they have already paid
- The scheme began requiring additional proof last year
The Federal Government will refund $721 million worth of debts it clawed back through its controversial Robodebt scheme.
The scheme saw hundreds of thousands of people issued with computer-generated debt notices, some of which made demands for payment from people who did not owe the Government any money.
Services Australia said in a statement that 470,000 debts would be waived, with refunds to be rolled out from July.
More than 370,000 people were affected, with some having been issued multiple notices.
People who have already paid their debts will be refunded.
"The best advice we have is that raising a debt wholly or partly on the basis of ATO-averaged income is not sufficient under law," Government Services Minister Stuart Robert said.
"Therefore, we will return that money and move forward with our income-compliance program."
Robodebt was the name given to an averaging process which saw data from the Australian Tax Office matched with income reported to Centrelink by welfare recipients.
But concerns were quickly raised that the process was faulty, with lawyers for people with the debts arguing the system lacked human oversight, and saying it reversed the burden of proof by requiring people issued with notices to demonstrate they did not owe money.
'Unlawful' program caused psychological harm: Shorten
Labor's Government Services spokesman Bill Shorten said the Government's backdown on the scheme should have come long ago.
"The Government has for years been illegally taking people's money," he said.
Mr Shorten has publicly supported a class action covering thousands of current and former Centrelink recipients, challenging the debts in the Federal Court.
He said the class action would continue.
"Hundreds of people, after receiving the debt notices, passed away, and I have no doubt that some of that in some cases is due, tragically, to the mental health pressures of Robodebt action by the Government," he said.
Greens Community Services spokeswoman Rachel Siewert said her party would work to ensure no person owed money was missed by the Government.
"We will be carefully scrutinising this process to ensure that every person who has been subject to this illegal process has been repaid," she said.
Repayments to begin in July
Mr Robert said people with an outstanding debt did not need to contact Centrelink about a refund.
"Australians don't need to do anything in terms of getting a refund," Mr Robert said.
We'll be actively contacting those Australians impacted, we'll be paying some 190,000 from the 1st of July, whose details we have.
"The remainder we'll be contacting to update their details
"We'll be proactively rectifying the record we have with them."
The decision comes after the Department of Human Services halted a key part of the scheme last year and said it would require additional proof before it used income averaging to identify over payments.
In November 2019, the Federal Court ruled in favour of a Victorian woman who had challenged her debt.
The judgment found the "demand for payment of an alleged debt … was not validly made".
Mr Robert said he was confident all debts would be followed up and repaid.
"I'm confident I've got the right numbers, and I'm confident we've got the right systems to do the refunds," he said.