It spread a year's pay evenly across the fortnights, then called the difference a debt.

Between July 2015 and November 2019 the Australian Government ran an automated system to claw back money from people who had received welfare payments. It worked like this. It took a person's yearly income, as reported to the Tax Office, and spread it evenly across every two-week period of the year — a "fortnight", which is how Australian welfare is paid. That gave what the parties called a "notional" or "assumed" fortnightly income. The system then compared that made-up figure with the income the person had actually reported to Centrelink, the welfare agency, for each fortnight — the figure their payments had originally been based on. Wherever the made-up figure was higher, the government treated the gap as an overpayment and demanded the money back as a debt [1].

The government chased those debts, including through private debt collectors [1]. In December 2016, as the scheme grew, the minister in charge, Alan Tudge, said on national television: "We will find you, we will track you down, and you will have to repay those debts, and you may end up in prison." A later Royal Commission — a formal public inquiry — recorded that people on income support had been made to feel "shame, oppression, isolation, and dehumanisation" [2].

The warnings came early. In April 2017 the Commonwealth Ombudsman, the official who investigates complaints against government, reported on the system. It found "deficiencies in (the department's) service delivery and communication to customers and staff when implementing the system". It found that debt letters "were unclear and did not include crucial information". And it found that the 21 days people were given to respond "was not reasonable or fair in all circumstances". The Ombudsman also found that around one in five people sent a debt notice did not owe any money [3]. The Royal Commission later put it more bluntly. It said "the beginning of 2017 was the point at which Robodebt's unfairness, probable illegality and cruelty became apparent". Instead of stopping, the path taken "was to double down, to go on the attack in the media against those who complained and to maintain the falsehood that in fact the system had not changed at all". The number of reviews then went up, not down: 681,292 from early 2017 under one programme and 247,459 from October 2018 under another, against 220,439 before 2017 [2].

One person's case broke the scheme. Deanna Amato, who worked for a local council, was told she owed $3,215.38. Centrelink had sent its letters to an address she had left almost three years earlier. It took her tax refund of more than $1,700 without her knowing. She had worked full-time for one employer and then moved to casual work when she started studying, so averaging her yearly pay overstated her income roughly fourfold for the fortnights in question. On 27 November 2019 the Federal Court, with the government's agreement, declared that the demand was not validly made: the information in front of the decision-maker could not show that a debt was owed. The government conceded that raising a debt on averaged Tax Office data alone was unlawful. Her real overpayment was $1.48. A later freedom-of-information request showed she had in fact been underpaid by just over $480 [4].

A class action — one court case brought on behalf of everyone affected — followed. On 11 June 2021 Justice Murphy of the Federal Court approved its settlement. He recorded that the government had admitted, during the case, that it had no proper legal basis to raise, demand or recover debts based on income averaging. On the evidence, it had "unlawfully asserted such debts, totalling at least $1.763 billion against approximately 433,000 Australians", and had recovered about $751 million from about 381,000 of them. The government agreed — without admitting liability — to pay $112 million including legal costs, and to stop pursuing the invalid debts. It also accepted court declarations that decisions resting only on averaged Tax Office data were not validly made, unless there was other evidence the person had earned a steady fortnightly amount. By then it had already refunded $707.9 million. Justice Murphy called the case "a shameful chapter in the administration of the Commonwealth social security system and a massive failure of public administration". Of roughly 648,000 people in the class, about 394,000 stood to get money back. Objections filed with the court described financial hardship and distress. Some people wrote of contemplating suicide. One grieving mother told the court her son had died by suicide after the government demanded payment of a debt she says he did not owe [1].

A Royal Commission delivered its report to the Governor-General on 7 July 2023, and it was tabled in Parliament the same day [2]. Commissioner Catherine Holmes AC SC found that "Robodebt was a crude and cruel mechanism, neither fair nor legal, and it made many people feel like criminals". She found that "people were traumatised on the off-chance they might owe money", and that the scheme was "a costly failure of public administration, in both human and economic terms" [5]. She made 56 recommendations, aimed mainly at strengthening the public service and the watchdogs that had failed to stop it. In November 2023 the government accepted, or accepted in principle, all 56 [2].

Comparing tax records with what people declared is legitimate, and no court in this story said otherwise. The same judgment that condemned the scheme drew the line exactly. A large group of people had debts that were not based on averaging at all. Their debts had been "assessed by the Commonwealth from payslips, bank statements and other information they provided", and Justice Murphy considered legal claims against those debts weak, and more likely than not to fail at trial [1]. Same data match, same agency, same years. The difference was whether a gap in the numbers opened an investigation or closed one. Deanna Amato's file shows it in miniature: once someone actually looked at what she had earned fortnight by fortnight, $3,215.38 became $1.48 [4].

The arithmetic never failed. The number it started from did not exist. Welfare is worked out on what someone earned in each particular fortnight, and people on welfare often work casual, part-time or on-and-off hours. So a year's pay divided evenly across fortnights describes nobody's real fortnights. Justice Murphy wrote that it "should have been plain" that the system "may indicate an overpayment of social security benefits when that was not in fact the case" [1]. The defining move was what the scheme did with that gap. Instead of treating it as a question to look into, it raised a debt, and "in the absence of further information from social security recipients" the assumption stood as the finding [1]. Debt collection followed, private collectors included [1]. The person had 21 days — a window the Ombudsman called "not reasonable or fair in all circumstances" — to dig out payslips from years earlier [3], from letters that may have gone to an address they had long since left [4].