Centrelink To Wipe $300 Million In Debts For 1.2 Million Australians

The Australian government has announced a major relief measure for millions of Centrelink recipients. A $300 million debt waiver package will cancel old debts that were wrongly calculated using a method called income apportionment.

This step will benefit around 1.2 million Australians, many of whom have been carrying these debts for years.

For decades, income apportionment was used to work out debts when Services Australia didn’t have full details of the days and hours someone worked. However, this method was later ruled unlawful by the Federal Court.

Now, the government has stepped in to correct the mistake, wipe the debts, and even offer small compensation to those affected.

What is Income Apportionment?

Income apportionment was a calculation method used between the early 1990s and 2020. When Centrelink did not have the exact dates or hours of a person’s employment, they spread their earnings evenly across weeks or fortnights.

This often led to incorrect debt amounts. Sometimes people were told they owed money when in fact, they didn’t. In other cases, the debt amounts were far higher than they should have been.

The Federal Court ruled in 2024 that this system was unlawful. Soon after, the Commonwealth Ombudsman recommended a large-scale waiver of these debts.

Key Features of the $300 Million Package

Here is a breakdown of the changes and what they mean for Australians:

Change/Benefit	Details
Total relief amount	$300 million
Number of people helped	1.2 million Australians
Median debt size	$330
Average debt age	19 years
Threshold for debt waiver	Raised to $250 (first increase in 30 years)
Resolution payment	Up to $600 for those affected (2003–2020)

Why is the Debt Being Cancelled?

The government admitted that collecting these small debts cost more than the debts were actually worth. In many cases, the administrative expenses were far greater than the value of the repayments.

According to Social Services Minister Tanya Plibersek, the decision will save time, reduce stress for Australians, and let Services Australia focus on larger and more serious matters.

She also highlighted that up to one-third of the affected people actually ended up with lower debts due to income apportionment errors, showing how inconsistent the system was.

Resolution Payments of Up to $600

For people who had debts between 2003 and 2020, the government is offering resolution payments of up to $600. These payments are meant as recognition that the method of calculating entitlements was invalid and caused unfair stress.

The exact process of applying for these payments will be explained once new legislation is introduced. People can also call Services Australia’s dedicated line (1800 560 870) or check their official website for updates.

Mixed Reactions to the Decision

Many welfare advocates have welcomed the announcement. Jay Coonan, a spokesperson from the Antipoverty Centre, said this was a step in the right direction but added that it should have happened much earlier.

He explained that people living on welfare are often shocked when told they have debts, especially debts from decades ago. While cancelling these debts helps, the emotional and financial damage caused over the years cannot be fully erased.

Advocates are now pushing for more reforms, such as reintroducing the six-year time limit on debt recovery, which is missing from this package.

The $300 million Centrelink debt waiver is a massive relief for over 1.2 million Australians. By cancelling unfair debts and offering payments of up to $600, the government is finally addressing the mistakes of income apportionment.

While many welcome this move, experts believe further reforms are needed to protect vulnerable people from similar situations in the future. For now, Australians affected by these debts can breathe easier knowing the burden will soon be lifted.

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