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The Department of Human Services has said it is “confident” in its debt recovery system and denies the process is wholly automated.
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The system, which has generated 169,000 debt notices since July, has been challenged by scores of people in Ballarat, some of whom have been hit with historic debts as high as $6000.
Others have said they started repayment plans out of fear of deductions to wages or benefits, or further legal action as outlined in notices from debt collector Dun and Bradstreet.
On Monday the Commonwealth Ombudsman announced it would be launching an inquiry into the system.
But DHS general manager Hank Jongen said the department was legally obliged to investigate discrepancies between income reported to Centrelink and Australian Tax Office records.
“This is part of ensuring the integrity of the welfare system,” Mr Jongen said.
“The online compliance intervention system doesn’t automate debt recovery – it is a system which automates part of the standard compliance review process.”
However Centrelink’s own staff have been reported as saying the system was set up in such a way that it did not understand casual employment.
A recent university graduate spoke to The Courier last week after receiving a $6000 debt notice shortly before Christmas for a debt he supposedly racked up in 2014-2015 – more than half his income for that year.
He said he was told by staff that the system appeared to have averaged out his yearly income from a single month when he had full time, casual work and had not been the recipient of any benefits.
Others spoke of having to trace pay slips from defunct employers from six years ago, being hounded by debt collectors through Christmas and of having their festive season ruined by stress as they made endless phone calls to challenge the debt.
Erik, who only wished to use his first name, received a call late on Thursday night from a Centrelink employee who apologised and said it was clear the debt had been incorrect.
He had been fighting the $3,200 supposed debt since November and through Christmas.
Opposition leader Bill Shorten joined a chorus of his colleagues on Monday calling on the government to suspend the debt recovery system.
Mr Shorten said the process had created “the summer from hell” after notices were issued shortly before Christmas.
Legal Aid Victoria has also called for the system to be immediately suspended.