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$112m to be paid to 380,000 Aussies following ‘shameful’ robodebt

380,000 Australians will receive a slice of the settlement. (Images: Getty).
380,000 Australians will receive a slice of the settlement. (Images: Getty).

Around 380,000 Australians affected by the Government’s robodebt scheme will receive $112 million in compensation after a Federal Court Judge deemed the debt recovery plan a “massive failure”.

Federal Court Justice Bernard Murphy approved an overall settlement of $1.2 billion between the Federal Government and robodebt victims on Friday.

The settlement was first announced in November 2020 but has now received court approval.

The robodebt scheme saw Centrelink recipients issued debt notices based on a flawed income averaging metric. The scheme wrapped up in 2019 after it was blasted as punitive, illegal and poorly designed.

Murphy said the scheme had caused financial hardship, anxiety and distress to Australia’s most vulnerable and the following legal claims had also triggered a “huge waste” of public money.

He said it should have been clear to the Government that many welfare recipients weren’t earning a consistent income, and as such choosing to raise debts based on this assumption was flawed from the start.

"The proceeding has exposed a shameful chapter in the administration of the Commonwealth social security system and a massive failure of public administration," Murphy said.

"One thing … that stands out … is the financial hardship, anxiety and distress, including suicidal ideation and in some cases suicide, that people or their loved ones say was suffered as a result of the Robodebt system, and that many say they felt shame and hurt at being wrongly branded 'welfare cheats'.”

Under the settlement with class action litigators Gordon Legal, victims will have $400 million in unlawful debts wiped, be repaid $720 million in ‘debts’ already paid and receive $112 million in compensation.

The Government will also pay Gordon Legal $8.4 million in legal costs.

The Federal Court heard the Government unlawfully raised $1.73 billion in debts against 433,000 people and received $751 million in payments from 380,000.

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Image: Yahoo Finance
Image: Yahoo Finance