Timing it wrong: Benefits, income tests, overpayments and debts
2 March, by Jane Millar and Peter Whiteford

Unexpected bills can be a challenge for any household. But for people who rely on social security payments, the unexpected news of a significant debt – sometimes dating back years – can be bewildering, to say the least. This is exactly what tens of thousands of Australians have experienced in recent months.

Since just before Christmas, Centrelink’s new automated data-matching system has resulted in a significant increase in the number of current and former welfare recipients assessed as having been overpaid, and therefore in debt to the government. The data-matching system seems to have identified people with earned income higher than the amount reported when their benefits were calculated.

Many of these people were alarmed when Centrelink contacted them about the assumed debt. Their stories have been recounted over the past two months in the mainstream media and in social media. The controversy prompted the shadow human services minister, Linda Burney, to request an auditor-general’s investigation. After receiving more than one hundred complaints about problems with the debt-recovery process, independent MP Andrew Wilkie asked the Commonwealth ombudsman to step in, and he has since launched an investigation. The Senate Community Affairs References Committee will also examine the new process.

This is by no means Australia’s first social security overpayment controversy. The last storm was sparked by the expansion and fine-tuning of family tax benefits in 2000. Under that new system, families were given the option of taking their payments as reductions in the income tax paid on their behalf by their employer. To ensure that this group was treated in the same way as those who received cash benefits from Centrelink, the government introduced an annual reconciliation process. Before the beginning of each financial year, families were asked to estimate what their income would be in the subsequent tax year; later, after they had filed their tax returns, an end-of-year reconciliation process would bring income and family benefits into line.

Read the full article at Austaxpolicy blog.