Recently many clients have contacted our service to seek legal advice on debts affected by Income Apportionment. In this month’s edition of Devil’s Advocate, we hope to explain what Income Apportionment is and the general approach that we currently advise clients to take to address these debts.

What is Income Apportionment?

Income apportionment was a method used by Centrelink from 2003 to 2020 to determine some individual’s fortnightly payment rates.

If a person is receiving Centrelink, they are required to report all employment income to Centrelink. Centrelink payments are generally paid every 14 days (a ‘Centrelink fortnight’).

To calculate an individual’s rate of payment for a fortnight, Centrelink must first determine their ‘daily rate’ of employment income.

Prior to 7 December 2020, when payslips or working periods did not align with the Centrelink fortnight, Centrelink would apportion the income evenly across the payslip period to come to a daily rate. This resulted in some income being apportioned across two or more Centrelink fortnights.

In their report, Lessons in Lawfulness, the Commonwealth Ombudsman found that this approach, of apportioning income across multiple Centrelink fortnights, was not permitted under social security law. The income should have been considered only within the Centrelink fortnight it was earned.

The law has now changed, and income is now considered within the Centrelink fortnight it was paid.

Income apportionment impacts some Centrelink debts that were raised from overpayments from 2003 to 2020, relating to employment earnings.

‘Income apportionment’ is different to ‘income averaging’ which was relevant to Robodebt.

What Happened?

In 2023 the Commonwealth Ombudsman investigated Services Australia’s approach to ‘income apportionment’ after it was reported that Services Australia had been applying the legislation incorrectly.

In summary, the report found that Services Australia (and DHS) unlawfully apportioned employment income across two or more Centrelink fortnight periods from 2003 to 2020. This “likely affected social security payment rates and may have led to unfair debts against customers” with estimates that more than 100,000 debts or potential debts were affected (page 1).

What Now?

The Commonwealth Ombudsman published their report in August 2023, and has made four recommendations and one suggestion. These recommendations are:

1. Seek legal opinion from the Solicitor-General or from the Federal Court in relation to the correct method to apportion employment income;
2. Allow for delegates to review historical debts, and in some instances create a positive obligation on the Secretary to review decisions that used income apportionment;
3. Develop a strategy with the Commonwealth Department of Public Prosecution (the ‘CDPP’) on how agencies will approach historic, current and future criminal prosecutions relating to Centrelink debts involving income apportionment;
4. Services Australia and the DSS share the legal advice they have received in relation to income protection with the CDPP. 

Services Australia partially accepted or accepted the recommendations.

Whilst Services Australia is seeking advice and determining their next steps, Centrelink has paused all debt recovery and debt reviews for debts impacted by income apportionment. Services Australia estimates they have paused around 13,000 review requests due to the debts potentially being affected by income apportionment.

The next step is to await Services Australia’s decision on how debts affected by income apportionment will be dealt with. Debts that are paused do not incur interest, so there is no detriment to a client in this sense. We understand some clients are frustrated with the uncertainty around whether they will need to repay the debt.

If a client suspects that they have a debt impacted by income apportionment, and their debt repayments aren’t currently paused, they can call the Centrelink complaints line on 1800 132 468. 

Does Your Client Have a Centrelink Debt? Introducing Social Security Debt Help

If you are supporting a client with a Centrelink debt, we’d encourage you to look at our online resource Social Security Debt Help. We wrote about it in last month’s Devil’s Advocate – click here to read. You can visit the website here: https://www.socialsecuritydebthelp.org.au/

Social Security Debt Help is a free online resource for people with Centrelink debts (overpayments) and those assisting them. It contains information about Centrelink debts, how they arise, and what you can do to address them. It also includes a self-help assessment tool that people with debts can use to better understand their situation and options, and get better advice and other help.

We’d love to hear about your experience with this. Feedback is always greatly appreciated and will help us iterate on and improve the resource as the project continues.

Additionally, we are running a second ‘Centrelink Debts Webinar’ on Monday 4 March from 10:00-11:00 am, which will cover the Social Security Debt Help resource, along with frequently discussed Centrelink debt topics. Click here to register.