Any robodebt victim with their case still under review - even if there is a potential debt - will no longer be pursued.
Under the failed scheme, more than $750 million was wrongfully taken from around 400,000 people.
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Social Services Minister Amanda Rishworth said clearing the outstanding cases would offer certainty to any Australians with reviews hanging over their heads.
Rishworth said pursuing the cases would be expensive and time-consuming, and would undermine public confidence in the welfare system.
"The robodebt fiasco is something that should be of deep concern to all Australians. We know it had a significant human cost," she said.
The unlawful debt-recovery scheme was initiated by the Coalition government in 2015 and falsely accused welfare recipients of owing money to the government.
A royal commission into the robodebt scheme will begin public hearings at the end of October.
What will the royal commission focus on?
The robodebt royal commission will look into the establishment, design and implementation of the scheme.
The Government wants to know who was responsible for it, why they thought robodebt was necessary, and any concerns raised regarding its legality and fairness.
Prime Minister Anthony Albanese dismissed criticism that the commission would be an opportunity to attack the former government, saying there was a human cost to the scheme.
"People lost their lives. Every single one of my local constituents, and every member of Parliament can tell stories like this," he said.
"Those people who were most vulnerable were the least likely to go to their local member, to have the confidence to do that. And that's why we need to get to the heart of why this occurred."