Australian Government settles Robodebt class action for $1.2B

• The Federal Government has ended the class action against its Robodebt system by agreeing to a $1.2 billion settlement
• Starting in 2015, the debt recovery program accused welfare recipients of owing money to the Government
• The class action trial was set for Monday before the Government decided to settle
• The $1.2 billion settlement consists of $112 million compensation, $398 million in waived debts and $721 million in repaid debts
• Split across over 400,000 plaintiffs, the settlement will result in less than $280 in compensation per person

The Federal Government has ended the class action against its Robodebt system by agreeing to a $1.2 billion settlement.

The Robodebt scheme was the Government’s attempt at an automatic debt recovery program, which started in 2015. Through a process of income averaging, the Robodebt program automatically issued notices to welfare recipients it identified as having debts.

The process of income averaging compares a person’s reported income to their income as measured by the Australian Tax Office. However, in November 2019, the Federal Court of Australia found that income averaging could not be solely relied upon to issue debts. 

Using this contested method, the Robodebt program accused some welfare recipients of owing money to the Government, when they did not.

Over 400,000 Australians took part in a massive class action against the Government, contesting the notices issued by Robodebt. Members of the class action were set for a trial on Monday, before the Commonwealth decided to settle at the eleventh hour.

While the total value of the settlement is $1.2 billion, the vast majority of this was already agreed to months ago. In May, the Federal Government announced that it would repay $721 million in debts which it illegally stole from 327,000 Australians. 

The balance consists of $398 million in remaining debts, which the Government has agreed to waive, and $112 million in actual compensation. Split across over 400,000 plaintiffs, the settlement will result in less than $280 in compensation per person.

This does not take into account any fees which the class action’s law firm, Gordon Legal, will seek out of the compensation.

One of the plaintiffs from the class action, Leonie Campbell, welcomed the Commonwealth’s decision to settle, but also spoke on the impact that the scheme has had on many struggling Australians.

“I think their response shows just how illegal the system was, and the stress that it put a lot of people through. I had a full-time job, but I’m imagining that wasn’t the case for a lot of people who had debts raised,” she said. 

Government Services MinisterStuart Robert, has confirmed that the income averaging method will stop being used.

Despite striking the $1.2 billion compensation deal, the Commonwealth has not accepted or admitted any liability in the matter. Furthermore, Australian Prime Minister Scott Morrison has stated that Minister Robert, who oversaw the Robodebt scheme, will keep his job.