Explainer – Deanna Amato's robo-debt case

In November 2019, Deanna Amato resolved her test case against the Australian Government’s automated debt system known as ‘robo-debt’.

What was Deanna’s robo-debt test case about?

Deanna asked the Federal Court to look at whether the Australian Government acted lawfully in raising her $2,754 robo-debt by substituting her fortnightly reported income with averaged ATO income data and adding a penalty fee when they did not hear from her (even though they were sending letters to her old address) then seizing her tax refund even though she did not know about her robo-debt.

The Federal Court has made orders, agreed to by both parties, after the Australian Government conceded that the averaging process using ATO income data to calculate Deanna’s robo-debt was unlawful.

The outcome of this test case confirms that a robo-debt calculated using only averaging of ATO income data is unlawful.

How did Deanna get a robo-debt?

Deanna is 33 and works in local government. Like hundreds of thousands of Australians, she accessed social security payments while studying just before entering employment.

Centrelink obtained information about Deanna’s income from the ATO and averaged out her income into fortnightly amounts over the 2011/2012 financial year. Centrelink concluded that Deanna had not correctly reported her income from April to June 2012 because the averaged figure did not match the fortnightly income she reported at the time. When Deanna did not respond to letters sent to an old address, Centrelink raised a debt based on the averaged ATO information alone and applied a 10% penalty. Centrelink did not use its information gathering powers to contact Deanna’s former employer or bank to provide details of actual earnings for the relevant fortnights to determine whether there should be a debt.

Deanna only found out about her robo-debt after her full tax refund of $1,709.87 was taken by Centrelink last year. Centrelink had sent eight letters to an address Deanna was no longer living at. Deanna had not updated her new address with Centrelink. She didn’t have an obligation to do so because she was no longer receiving Centrelink payments.

After Victoria Legal Aid assisted Deanna to file her case, Centrelink used its powers to contact Deanna’s former employer and bank to verify her earnings and decided that the debt amount was wrong. They said she was overpaid only $1.48 and wiped the remaining debt.

Our arguments

In our submissions served on the Australian Government and filed in the Federal Court on 11 November 2019, Victoria Legal Aid argued that the robo-debt system used in Deanna’s case is inconsistent with key provisions in the Social Security Act which set out how a debt can lawfully be raised.

Our arguments focused on:

1. Averaging – A person’s entitlement to social security payments is based on actual fortnightly income. Using yearly income information to create averaged fortnightly earnings is not a lawful or accurate method of calculating a debt.
   
2. Reverse onus of proof – We argued that shifting the onus on to individuals to show that they do not owe a robo-debt is unlawful. If the calculation is inaccurate to start with, somebody’s failure to engage does not provide a basis for claiming that a person owes a robo-debt.

We also raised arguments about the lawfulness of some of the other key elements of the robo-debt system, including the use of penalty fees and the use of tax garnishees:

1. Penalty fees – A penalty fee of 10% was imposed on Deanna before she even knew that her robo-debt existed. Under the Social Security Act, a penalty fee should only be imposed where Centrelink is satisfied a person knowingly provided misleading information or failed to comply with the legal obligations set out in social security legislation to provide particular information. We said this state of satisfaction was not met in the case of Deanna’s robo-debt.
   
2. Tax refunds – Centrelink took Deanna's full tax refund of $1,709.87 before she had ever spoken with anyone from Centrelink or received correspondence. We said garnishing a tax refund should not occur unless an accurate debt has been established and other conditions under the Social Security Act are met.

What was the outcome?

On 19 November 2019, a week after filing our legal submissions in this case, media outlets reported that the Department of Human Services would stop using income averaging as the basis of raising a debt without Centrelink obtaining further evidence to ensure an overpayment amount is accurate. The Australian Government confirmed that this policy change took place after the Australian Government received legal advice about legal challenges on foot, and that Centrelink would no longer raise robo-debts calculated solely using income averaging without additional evidence of an overpayment.

On 25 November 2019, the Australian Government sent a letter to the Federal Court conceding that the key elements of the robo-debt process raised in Victoria Legal Aid’s test case on behalf of our client Deanna Amato were unlawful.

The Australian Government conceded that in Deana’s case:

1. Raising the robo-debt by ‘averaging’ of ATO data was unlawful;
2. Adding a 10% penalty fee to the robo-debt based on the information they had was unlawful; and
3. Seizing the tax refund when there was no lawful basis for the robo-debt was unlawful.

The Australian Government agreed to pay Deanna $92 in interest on the amount that was unlawfully taken.

As both parties agreed that these elements of robo-debt were unlawful, the matter was resolved without the need for a full hearing. Federal Court Justice Davies made orders with both parties’ consent confirming that the matter has been resolved and ordering that the Australian Government pay Deanna’s legal costs.

The Federal Court issued orders by consent in favour of our client after the Australian Government conceded that the averaging process used to calculate Deanna Amato's robo-debt (based on income data from the Australian Taxation Office) was unlawful. The outcome of this test case confirms that a robo-debt calculated using only averaging of ATO income data is unlawful.

What will be the impact of this decision on other people with robo-debts?

This test case has broader implications for other people who have received robo-debt letters from Centrelink or had their tax refunds seized solely on the basis of ‘averaging’ ATO data.

All debts raised solely by averaging ATO income data are unlawful and should be immediately set aside, recovery action should be stopped and any debt payments made should be refunded.

What should people do if they have a robo-debt?

Victoria Legal Aid will continue to provide free legal help to people who are experiencing issues with robo-debt.

The Australian Government has announced changes to how future overpayments will be calculated and pursued by Centrelink. We will be seeking clarification on Centrelink’s process for dealing with robo-debts which were unlawfully raised using only averaging in cases similar to Deanna’s.

There are different courses of action available depending on the status of your robo-debt

I am not sure if my debt is a robo-debt or not

If you provided payslips or bank statements to Centrelink it is unlikely that this decision will affect you, as Centrelink may have had a valid legal basis to claim that you were overpaid using this further information.

If you are unsure of whether your debt was calculated by using averaged income data from the ATO, you should contact Centrelink’s compliance division on 1800 086 400 and ask them to provide you with details in writing of the information they relied on to calculate the overpayment amount. If Centrelink continue to pursue you for the debt and do not provide you with this information, you could ask Centrelink to put a hold on recovery action and for an Authorised Review Officer to review the decision.

I am currently paying off a robo-debt on a payment plan

If you are currently on a payment plan to Centrelink for a robo-debt calculated by substituting averaged income data for your fortnightly reporting amounts, this robo-debt is unlawful.

You should call Centrelink’s repayments division on 1800 076 072 and ask Centrelink to cancel automatic repayments from your social security payments or notify Centrelink that you will be stopping your repayments. You should also ask Centrelink for a refund for the amount you have already paid.

I have previously paid off a robo-debt

If you have previously paid all or part of a robo-debt calculated by substituting averaged income data for your fortnightly reporting amounts, this robo-debt is unlawful. This includes people whose robo-debts have been paid by the ATO seizing your tax refund or Centrelink automatically deducting your social security payments on a payment plan to pay the robo-debt.

You should call Centrelink’s compliance division on 1800 086 400 and request a refund.

The private law firm Gordon Legal has initiated a class action on behalf of people with robo-debts seeking compensation. You can contact Gordon Legal if you are interested in finding out more about their Class Action.

I have received letters saying I have a robo-debt, but I haven’t taken any action

If you have received letters from Centrelink about a robo-debt calculated by substituting averaged income data for your fortnightly Centrelink reporting amounts, but have not made any repayments, this robo-debt is unlawful. You should not be required to make any repayments to this debt.You can call Centrelink’s compliance division on 1800 086 400 and request that Centrelink not take any steps to recover this debt.

I have received letters saying I may have a debt, but I haven’t taken any action

If you have received letters from Centrelink about a possible debt but have not taken any action, Centrelink should not raise a debt by substituting averaged income data for your fortnightly reporting amounts, as this is unlawful.

If Centrelink raises a debt against you can ask Centrelink to provide details in writing of the information it relied on in calculating your debt.

Get other support for help with your robo-debt.

Legal documents

Victoria Legal Aid's submissions(opens in a new window).

Statement of Agreed Facts(opens in a new window).

Orders from the Federal Court, 27 November 2019.

More information

Read our media release about Deanna's case.

Get other support with Centrelink's robo-debts.

Read 'Two weeks before legal challenge Australian Government rewinds robo-debt'.