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Federal Court declares robodebt unlawful

A Medicare and Centrelink office sign is seen at Bondi Junction on March 21, 2016 in Sydney, Australia. Image: Getty

The federal court has described a $2,500 debt raised again Australian woman, Deanna Amato, was “not validly made”, due to its use of income averaging. 

The verdict comes days after the federal government conceded it would end the controversial practice of income averaging to identify “debts”. 

The debts were levied at Australians who had received Centrelink payments, with the government claiming those payments were overpaid, before garnishing recipients’ tax returns and demanding payments. 

The Department of Human Services’ said Amato’s original debt of $2,900 was based on Australian Tax Office income data averaged over fortnightly periods, assuming that this was Amato’s actual income. This debt was later reassessed to be $2,500. 

When Amato went public with the debt, after the government garnished $1,709 of her tax return, the government recalculated her debt to $1.48. 

And in the landmark decision today, the federal court said the decision to garnish Amato’s tax return was unlawful. 

“Today, the Australian Government has conceded that the unfair and inaccurate income-averaging process used to calculate Deanna’s robo-debt was also unlawful,” said Victoria Legal Aid’s Rowan McRae. 

“If a debt isn’t calculated properly, Centrelink cannot go on and pursue a person to pay the money.”

McRae said Amato’s case has clarified the unlawfulness of the income averaging robodebt system. 

The government had previously refunded the $1,709 that it had taken from Amato’s tax return and was today forced to pay for Victoria Legal Aid’s legal costs, and pay Amato $92 in interest for the money taken. 

“I had my money refunded to me, but I hope that others who have paid dodgy debts will also have a way to get their money back,” Amato said. 

“Getting rid of the averaging element of the system is a giant leap forward – my debt was raised because of this averaging, and it’s now so obvious how incorrect it can be.”

Another class action by Gordon Legal also challenges robodebt’s legality, with former Labor leader Bill Shorten and several welfare groups also criticising the controversial scheme.

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