Govind TekaleAustralians wrongly chased for Centrelink debts will get up to $600 compensation after the government admitted its calculation method was unlawful for nearly three decades.
The $300 million package follows a July 2025 Federal Court ruling that found Centrelink’s “income apportionment” method – used from the 1990s until 2020 – broke social security law.
About three million people who had debts calculated using this system between 2003 and 2020 can claim payments, Social Services Minister Tanya Plibersek announced.
“This package will spare Australians with small debts significant stress,” Plibersek said in her statement.
The problem centered on how Centrelink spread income across fortnightly reporting periods when people’s paydays didn’t match government payment cycles. If you got paid monthly but Centrelink required fortnightly reporting, the system would guess your income for each period – often incorrectly – leading to inflated debts.
Many of these debts have hung over people’s heads for years. Legal Aid NSW reported the average age of affected debts is 19 years, with a median value of $330.
The government has also raised the small debt threshold from $200 to $250, the first increase in over 30 years. Finance Minister Katy Gallagher noted, “The cost of recovering these small debts often exceeds their value,” adding that the government was “learning from the mistakes of former governments.”
The package will eliminate approximately 1.2 million debts in 2025-26 alone.
To help people access compensation, the government has given $400,000 each to Economic Justice Australia and the Australian Council of Social Service. Services Australia has set up a dedicated phone line at 1800 560 870 for those with questions.
Monique Hitter from Legal Aid NSW called the debt waiver “fiscally responsible and ethical” in their official statement. Greens Senator Penny Allman-Payne compared the situation to the Robodebt scandal, saying the system “brutalises people living in poverty over ridiculous errors.” Jay Coonan from the Antipoverty Centre welcomed the relief but pushed for deeper reforms.
Eligible Australians don’t need to do anything yet. Services Australia will contact people directly once parliament passes the necessary legislation.
The package applies nationwide with no state-by-state differences in eligibility or payment amounts.
