For many Australian families, the arrival of a Centrelink debt notice has long been a source of sleepless nights and mounting stress. But in what advocates are calling a 'tremendous win,' the federal government has announced that about 3 million Australians affected by Centrelink's unlawful debt calculation method will be eligible for up to $600 in compensation after admitting the process was invalid.
The $300 million package announced by Social Services Minister Tanya Plibersek represents more than just monetary relief—it's recognition that for decades, vulnerable Australians were subjected to a flawed system that caused unnecessary hardship and anxiety.
A Victory Years in the Making
The decision follows a federal court ruling in July 2025, which found the method the social services department used to calculate a welfare participant's payment—known as income apportionment—from the early 1990s to 2020 was invalid.
This landmark case, known as Chaplin v Secretary, Department of Social Services, finally put an end to a practice that affected millions of Australians over three decades.
The scale of this issue is staggering. From the early 1990s until 2020, more than 5.3 million welfare debts were calculated using income apportionment, with the unlawful debts worth $4.31 billion in total, affecting almost three million Australians.
Remarkably, about 91 per cent of these debts—$3.93 billion—have already been repaid to Centrelink, highlighting how many Australians dutifully paid money they may not have lawfully owed.
Understanding Income Apportionment: What Went Wrong
To understand why this compensation is so significant, it's important to grasp what income apportionment actually was.
Unlike the more notorious Robodebt scheme, income apportionment is not Robodebt. This was a separate but equally problematic system.
When you received welfare payments like JobSeeker or the Age Pension and also had some employment income, Centrelink needed to work out exactly how much you earned in each fortnight to calculate your correct payment.
The problem arose when your employer's pay cycle didn't match Centrelink's fortnightly reporting period.
Before December 2020, Centrelink commonly used income apportionment to help work out how much people should have been paid.
Your payslip or income report showed your total earnings but did not show which days you worked or how much you earned in each Centrelink fortnight.
How Income Apportionment Worked
When your pay cycle didn't align with Centrelink's fortnight, the system would make assumptions about when you earned your money. For example, if you were paid $1,000 for two weeks of work but it covered parts of three different Centrelink fortnights, the system would divide that income across those periods—even if you didn't actually work during some of those days. This often resulted in overpayments and subsequent debt notices.
The fundamental flaw was that your eligibility or payment rate may have been impacted if the actual days you worked in those fortnights were not evenly spread out.
Essentially, the system attributed earnings to people for days and fortnights they hadn't actually worked.
The Legal Victory That Changed Everything
Income apportionment was stopped on 7 December 2020, and this means it doesn't impact any payment rate or debt decisions relating to income earned after that date.
However, the legacy of this flawed system continued to haunt millions of Australians until the recent court decision.
The case that finally resolved this mess involved a young man named Matthew Chaplin, who had been asked to repay nearly $912 in Youth Allowance overpayments dating back to 2014-2015.
When he tried to get employment records from his former employer to verify the debt, the records were no longer available—a common problem for people dealing with historical debts.
In the test case Chaplin v Secretary, Department of Social Services, the full Federal Court approved a method proposed by the government to recalculate the debts.
The court was not asked whether the debts were unlawful—a point the department had already conceded—but whether its remedy was legally sound. In a two-judge majority, the court ruled it generally was.
What This Means for Australian Seniors
For many readers of the Seniors Discount Club, this announcement brings particular relief. Seniors who worked part-time while transitioning to retirement, or who had casual employment while receiving Age Pension, were among those most likely to be caught up in the income apportionment system.
The compensation package has two main components that will directly benefit older Australians:
1. Resolution Payments: People with historic debts affected by income apportionment from 2003 to 2020 will be eligible for resolution payments of up to $600. This can come as cash or as an offset against amounts still owed.
2. Debt Threshold Increase: The threshold for waiving small, accidental debts will be raised to $250 for the first time in over 30 years. This means about 1.2 million debts are expected to be waived or not raised this financial year.
'The complex appeal process for a small debt is the same as that for a larger debt so this decision will remove a lot of unnecessary stress from people's lives'
Kate Allingham, chief executive of Economic Justice Australia, described the threshold increase as a 'gamechanger.' For seniors living on fixed incomes, the stress of dealing with small debt recovery processes can be disproportionately overwhelming, regardless of the amount involved.
How Income Apportionment Differed from Robodebt
While both systems caused significant hardship, it's important to understand the key differences between income apportionment and the infamous Robodebt scheme that dominated headlines in recent years.
While Social Services has sought to distinguish income apportionment from Robodebt, the two methods of calculating debt are comparable. Both attributed a person's daily income beyond the timeframe permitted by law.
But there are differences in source and scale. Where apportionment was personalised by using individual customer payslips, Robodebt used Australian Tax Office records to raise debts en masse.
Importantly, while the ombudsman said the department's understanding of the law relating to apportionment was 'incorrect', it was also 'genuinely held'. This contrasts with Robodebt, which was found to be a deliberate attempt to increase debt recovery.
However, many individuals affected by apportionment debts raised after 2015 will be the same people served with Robodebt notices. This means some of our most vulnerable community members were subjected to not one, but two flawed debt recovery systems.
Getting Help: Your Rights and Resources
One of the most positive aspects of this announcement is the comprehensive support being put in place to help people navigate the compensation process. EJA and the Australian Council of Social Services will each be given $400,000 to help recipients navigate the compensation process.
Customers with an impacted debt don't need to do anything. Services Australia will contact customers directly with more information on the next steps. This is crucial for seniors who may be concerned about missing out or making mistakes in the application process.
However, it's always wise to be proactive about understanding your rights. If you believe you may have been affected by income apportionment, here are your key resources:
- Services Australia Income Apportionment Line: 1800 560 870
- National Debt Helpline: 1800 007 007 (weekdays 9:30 am-4:30 pm)
- Economic Justice Australia: Find your local community legal centre at ejaustralia.org.au
Did you know?
Did you know?
The government acknowledged that the administrative cost of chasing small debts often exceeded the value of the debt itself. In some cases, it was costing more to recover a $100 debt than the debt was worth, making the entire process economically irrational.
What to Watch Out For: Scam Warning
With any high-profile government announcement involving payments, it's crucial to be aware of potential scams. Here are some important safety tips:
- Services Australia will never ask you to pay money to receive compensation
- Legitimate government communication will come through official channels, including your myGov account
- Be wary of unsolicited phone calls or emails claiming to help you access compensation for a fee
- When in doubt, hang up and call Services Australia directly on their official numbers
The Broader Impact on Social Security Reform
This compensation package represents more than just financial relief—it's part of broader social security reform aimed at creating a fairer, more transparent system.
Minister Plibersek described the announcement as an 'important first step toward social security reform.'
The government acknowledged the administrative cost of chasing small debts often cost more than the debt itself, making the process 'uneconomical'. It described the announcement as an 'important first step toward social security reform'.
'Our social security system is designed to be there for Australians when they fall on hard times, which is why it's important debt recovery processes must be fair and transparent'
The announcement also aligns with recommendations from the Robodebt Royal Commission, which called for a six-year limit on debt recovery. While this specific recommendation hasn't been implemented yet, advocacy groups continue to push for this reform.
Lessons from the Robodebt Royal Commission
The Robodebt Royal Commission, which delivered its final report in July 2023, found that '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'.
While income apportionment was a separate issue, the Commission's findings have influenced how the government approaches all debt recovery processes. The emphasis is now on fairness, transparency, and putting people at the centre of government services.
Key Takeaways: What You Need to Know
- Up to $600 compensation available for debts from 2003-2020
- You don't need to apply—Services Australia will contact you
- Small debt threshold raised to $250 for the first time in 30+ years
- Free legal help available through community legal centres
- Be aware of potential scams—legitimate help is always free
- Legislation to implement changes coming in the next few weeks
Looking Ahead: Legislative Changes Coming
Legislation will be introduced into the Parliament in the coming weeks to implement the changes. This will provide legal certainty and ensure the compensation process runs smoothly.
The government has also committed to avoiding the need to recalculate potentially millions of historical debts by providing legislative clarity to the historical practice.
This pragmatic approach recognises that some administrative decisions, while technically flawed, were made in good faith and should be resolved efficiently rather than creating years more bureaucratic complexity.
Your Voice Matters: Share Your Experience
The journey to this compensation announcement has been driven largely by the voices of affected Australians who refused to accept that an unlawful system was 'just the way things are.'
Whether through advocacy groups, parliamentary inquiries, or simply telling their stories to family and friends, ordinary Australians have played a crucial role in bringing about this change.
The Robodebt Royal Commission specifically acknowledged the role of 'activists, advocates, whistleblowers, journalists, members of Labour and the cross bench, and of course the victims themselves who fought tirelessly for accountability and justice.'
This victory belongs to everyone who stood up and said the system needed to change. It's a reminder that in our democracy, persistent advocacy and community action can lead to real reform.
The Human Cost: Never Forgotten
While this compensation brings welcome relief, it's important to acknowledge that for some families, it comes too late.
'When you're living week to week on poverty payments, a debt notice from the government can cause your whole life to spiral.
Tragically for some it has led them to take their own lives', noted Greens spokesperson Penny Allman-Payne.
The stress and anxiety caused by debt recovery processes on people already facing financial hardship cannot be understated. This is why the reforms go beyond just financial compensation to address systemic issues in how government interacts with vulnerable citizens.
What This Means For You
As we celebrate this victory, we also honour the memory of those who didn't live to see this resolution and recommit to ensuring such systemic failures never happen again.
The $300 million compensation package represents more than just money—it's an acknowledgment of dignity wrongfully stripped away and a commitment to rebuilding trust between government and the people it serves. For the 3 million Australians affected, it's finally time to close this difficult chapter and look forward to a fairer future.
Have you or your family been affected by Centrelink debt issues over the years? We'd love to hear your thoughts on this announcement in the comments below. Your experiences and insights help our community stay informed and support each other through these important changes.
Original Article
https://www.theguardian.com/austral...ion-to-be-eligible-for-up-to-600-compensation
About 3m Australians affected by unlawful Centrelink debt calculation to be eligible for up to $600 compensation
Cited text: As a result of Wednesday’s announcement, people with historic debts affected by income apportionment from 2003 to 2020 will be eligible for resolution...
Excerpt: about 3 million Australians affected by Centrelink's unlawful debt calculation method will be eligible for up to $600 in compensation
https://www.inkl.com/news/about-3m-...ion-to-be-eligible-for-up-to-600-compensation
About 3m Australians affected by unlawful Centrelink debt calculation to be eligible for up to $600 compensation
Cited text: Photograph: Darren England/AAP · About 3 million Australians affected by Centrelink’s unlawful debt calculation method will be eligible for up to $600...
Excerpt: about 3 million Australians affected by Centrelink's unlawful debt calculation method will be eligible for up to $600 in compensation
https://www.inkl.com/news/about-3m-...ion-to-be-eligible-for-up-to-600-compensation
About 3m Australians affected by unlawful Centrelink debt calculation to be eligible for up to $600 compensation
Cited text: The decision follows a federal court ruling in July which found the method the social services department used to calculate a welfare participant’s pa...
Excerpt: The decision follows a federal court ruling in July 2025 which found the method the social services department used to calculate a welfare participant's payment—known as income apportionment—from the early 1990s to 2020 was invalid
https://www.inkl.com/news/about-3m-...ion-to-be-eligible-for-up-to-600-compensation
Update to Secretary’s public statement on income apportionment | Department of Social Services
Cited text: On 15 July 2025, the Full Court of the Federal Court of Australia handed down its judgement in the matter of Matthew Chaplin v Secretary, Department o...
Excerpt: The decision follows a federal court ruling in July 2025 which found the method the social services department used to calculate a welfare participant's payment—known as income apportionment—from the early 1990s to 2020 was invalid
https://www.dss.gov.au/news/update-secretarys-public-statement-income-apportionment
The ghost of Robodebt—Federal Court rules billions of dollars in welfare debts must be recalculated
Cited text: From the early 1990s until 2020, more than 5.3 million welfare debts were calculated using income apportionment.
Excerpt: From the early 1990s until 2020, more than 5.3 million welfare debts were calculated using income apportionment
https://theconversation.com/the-gho...-in-welfare-debts-must-be-recalculated-261543
Ghost of Robodebt: Billions of dollars in welfare debts to be redone
Cited text: From the early 1990s until 2020, more than 5.3 million welfare debts were calculated using income apportionment.
Excerpt: From the early 1990s until 2020, more than 5.3 million welfare debts were calculated using income apportionment
https://www.thenewdaily.com.au/news/national/2025/07/28/robodebt-federal-court-welfare
Ghost of Robodebt: Billions of dollars in welfare debts to be redone
Cited text: The unlawful debts are worth $4.31 billion in total, and affect almost three million Australians.
Excerpt: the unlawful debts worth $4.31 billion in total, affecting almost three million Australians
https://www.thenewdaily.com.au/news/national/2025/07/28/robodebt-federal-court-welfare
The ghost of Robodebt—Federal Court rules billions of dollars in welfare debts must be recalculated | YourLifeChoices
Cited text: The unlawful debts are worth $4.31 billion in total, and affect almost three million Australians.
Excerpt: the unlawful debts worth $4.31 billion in total, affecting almost three million Australians
https://www.yourlifechoices.com.au/...ollars-in-welfare-debts-must-be-recalculated/
Ghost of Robodebt: Billions of dollars in welfare debts to be redone
Cited text: About 91 per cent of these debts—$3.93 billion—have already been repaid to Centrelink.
Excerpt: about 91 per cent of these debts—$3.93 billion—have already been repaid to Centrelink
https://www.thenewdaily.com.au/news/national/2025/07/28/robodebt-federal-court-welfare
The ghost of Robodebt—Federal Court rules billions of dollars in welfare debts must be recalculated | YourLifeChoices
Cited text: About 91 per cent of these debts—$3.93 billion—has already been repaid to Centrelink.
Excerpt: about 91 per cent of these debts—$3.93 billion—have already been repaid to Centrelink
https://www.yourlifechoices.com.au/...ollars-in-welfare-debts-must-be-recalculated/
Information about income apportionment—Managing your money—Services Australia
Cited text: Income apportionment is not Robodebt.
Excerpt: income apportionment is not Robodebt
https://www.servicesaustralia.gov.au/information-about-income-apportionment?context=60271
Information about income apportionment—Managing your money—Services Australia
Cited text: Before December 2020, we commonly used it to help us work out how much people should have been paid.Your payslip or income report showed your total ea...
Excerpt: Before December 2020, Centrelink commonly used income apportionment to help work out how much people should have been paid.
https://www.servicesaustralia.gov.au/information-about-income-apportionment?context=60271
Information about income apportionment—Managing your money—Services Australia
Cited text: However, your eligibility or payment rate may have been impacted if the actual days you worked in those fortnights were not evenly spread out.
Excerpt: your eligibility or payment rate may have been impacted if the actual days you worked in those fortnights were not evenly spread out
https://www.servicesaustralia.gov.au/information-about-income-apportionment?context=60271
Information about income apportionment—Managing your money—Services Australia
Cited text: We stopped using income apportionment on 7 December 2020. This means it doesn’t impact any payment rate or debt decisions relating to income earned af...
Excerpt: Income apportionment was stopped on 7 December 2020, and this means it doesn't impact any payment rate or debt decisions relating to income earned after that date
https://www.servicesaustralia.gov.au/information-about-income-apportionment?context=60271
Ghost of Robodebt: Billions of dollars in welfare debts to be redone
Cited text: In the test case Chaplin v Secretary, Department of Social Services, the full Federal Court approved a method proposed by the government to recalculat...
Excerpt: In the test case Chaplin v Secretary, Department of Social Services, the full Federal Court approved a method proposed by the government to recalculate the debts.
https://www.thenewdaily.com.au/news/national/2025/07/28/robodebt-federal-court-welfare
About 3m Australians affected by unlawful Centrelink debt calculation to be eligible for up to $600 compensation
Cited text: It is the first time the threshold has been increased for more than 30 years.
Excerpt: The threshold for waiving small, accidental debts will be raised to $250 for the first time in over 30 years
https://www.inkl.com/news/about-3m-...ion-to-be-eligible-for-up-to-600-compensation
Albanese Labor govt to forgive historic welfare debts with $300m | The Canberra Times | Canberra, ACT
Cited text: The threshold for waiving small, accidental debts will also be increased for the first time in over 30 years to $250, with around 1.2 million debts ex...
Excerpt: The threshold for waiving small, accidental debts will be raised to $250 for the first time in over 30 years
https://www.canberratimes.com.au/st...-to-forgive-historic-welfare-debts-with-300m/
About 3m Australians affected by unlawful Centrelink debt calculation to be eligible for up to $600 compensation
Cited text: The threshold for small, accidental debts will also be raised to $250, meaning about 1.2 million debts are expected to be waived or not raised this fi...
Excerpt: about 1.2 million debts are expected to be waived or not raised this financial year
https://www.inkl.com/news/about-3m-...ion-to-be-eligible-for-up-to-600-compensation
About 3m Australians affected by unlawful Centrelink debt calculation to be eligible for up to $600 compensation
Cited text: The social services minister, Tanya Plibersek, announced on Wednesday the government would also raise the threshold for small, accidental debts to $25...
Excerpt: about 1.2 million debts are expected to be waived or not raised this financial year
https://www.inkl.com/news/about-3m-...ion-to-be-eligible-for-up-to-600-compensation
The ghost of Robodebt—Federal Court rules billions of dollars in welfare debts must be recalculated
Cited text: While Social Services has sought to distinguish income apportionment from Robodebt, the two methods of calculating debt are comparable.Both attributed...
Excerpt: While Social Services has sought to distinguish income apportionment from Robodebt, the two methods of calculating debt are comparable.
https://theconversation.com/the-gho...-in-welfare-debts-must-be-recalculated-261543
The ghost of Robodebt—Federal Court rules billions of dollars in welfare debts must be recalculated
Cited text: Lukas Coch/AAP · Significantly, while the ombudsman said the department’s understanding of the law relating to apportionment was “incorrect”, it was a...
Excerpt: while the ombudsman said the department's understanding of the law relating to apportionment was 'incorrect', it was also 'genuinely held'
https://theconversation.com/the-gho...-in-welfare-debts-must-be-recalculated-261543
The ghost of Robodebt—Federal Court rules billions of dollars in welfare debts must be recalculated
Cited text: Many individuals affected by apportionment debts raised after 2015 will be the same people served with Robodebt notices.
Excerpt: many individuals affected by apportionment debts raised after 2015 will be the same people served with Robodebt notices
https://theconversation.com/the-gho...-in-welfare-debts-must-be-recalculated-261543
About 3m Australians affected by unlawful Centrelink debt calculation to be eligible for up to $600 compensation
Cited text: EJA and Australian Council of Social Service will each be given $400,000 to help recipients navigate the compensation process.
Excerpt: EJA and Australian Council of Social Service will each be given $400,000 to help recipients navigate the compensation process
https://www.inkl.com/news/about-3m-...ion-to-be-eligible-for-up-to-600-compensation
Addressing income apportionment—Managing your money—Services Australia
Cited text: Customers with an impacted debt don’t need to do anything. We’ll contact customers directly with more information on the next steps.
Excerpt: Customers with an impacted debt don't need to do anything. Services Australia will contact customers directly with more information on the next steps
https://www.servicesaustralia.gov.au/addressing-income-apportionment?context=60271
About 3m Australians affected by unlawful Centrelink debt calculation to be eligible for up to $600 compensation
Cited text: The government acknowledged the administrative cost of chasing small debts often cost more than the debt itself, making the process “uneconomical”. It...
Excerpt: The government acknowledged the administrative cost of chasing small debts often cost more than the debt itself, making the process 'uneconomical'.
https://www.inkl.com/news/about-3m-...ion-to-be-eligible-for-up-to-600-compensation
Final report of the Royal Commission into the Robodebt Scheme | Prime Minister of Australia
Cited text: The Royal Commission has found that “Robodebt was a crude and cruel mechanism, neither fair nor legal, and it made many people feel like criminals. In...
Excerpt: 'Robodebt was a crude and cruel mechanism, neither fair nor legal, and it made many people feel like criminals.
https://www.pm.gov.au/media/final-report-royal-commission-robodebt-scheme
Albanese Labor govt to forgive historic welfare debts with $300m | The Canberra Times | Canberra, ACT
Cited text: Legislation will be introduced into the Parliament in the coming weeks to implement the changes.
Excerpt: Legislation will be introduced into the Parliament in the coming weeks to implement the changes
https://www.canberratimes.com.au/st...-to-forgive-historic-welfare-debts-with-300m/
About 3m Australians affected by unlawful Centrelink debt calculation to be eligible for up to $600 compensation
Cited text: “When you’re living week to week on poverty payments, a debt notice from the government can cause your whole life to spiral. Tragically for some it ha...
Excerpt: 'When you're living week to week on poverty payments, a debt notice from the government can cause your whole life to spiral.
https://www.inkl.com/news/about-3m-...ion-to-be-eligible-for-up-to-600-compensation
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