Welfare debt crackdown grabs tax return cash


People who owe money to welfare agencies will have debts snatched from their tax returns while Centrelink and the Tax Office will get unprecedented instant electronic snooping powers over welfare recipients’ financial affairs under the Coalition’s latest policy to stamp out social security rorts.

Estimated to boost the Budget bottom line by $1.1 billion, final pre-election costings released by Treasurer Scott Morrison on Tuesday reveal the promised welfare crackdown will include adoption of “real time monitoring and real-time data analysis of online transactions to immediately address potential non-compliance concerns.”

The core of the Coalition’s plan is the claw back of a $3.5 billion standing debt “due to fraud, non-compliance or misreporting in the welfare system” by applying tactics similar to those used by the Child Support Agency (CSA) to force deadbeat parents to pay up.

“A new and important recovery initiative which is to be part of the Coalition’s overall strategy is to expand tax garnishing to recover unpaid welfare debt,” the policy says.

“Existing processes already ensure that debts are recovered from former welfare recipients who are not in a repayment arrangement by garnishing their tax return and now this process will be expanded to current welfare recipients with debts owing regardless of whether or not they are in a repayment arrangement.”

Put more simply, that means welfare agencies chasing debts will simply take the money directly from debtors’ tax returns rather than trying to make repayment arrangements with individuals.


Employers spared collection

However the new policy has pulled up short of directly docking the wages of welfare debtors, an enforcement tactic Child Support authorities often use to intercept cash flowing from employers before it hits debtors’ bank accounts.

While hitting wages would clearly be a highly effective option, it is understood many large employers are strongly against the move because of the administrative burden and withholding obligations it would foist on them.

The latest crackdown policy is a significant policy departure from the decades-old system of chasing down government debts and overpayments by trying to negotiate gradual payment plans with welfare debtors and then heading to the courts.

Social policy advocates have also long been critical of Australia’s convoluted system of welfare payments because of the heavy burden of complex manual administration and self-reporting incumbent on benefit recipients and the potential for unintended mistakes and potential for fraud.

The government now estimates that around $870 million is owed to it from former welfare recipients, a debt it already chases down using tax return garnishing.

The policy does not say what agency would get priority if debts are owed to both welfare agencies and the Tax Office.


Electronic fraud profiling and data mining intensifies

Aside from the unashamed cash snatch, a massive profiling, data matching and cross checking push is being proposed by the Coalition, all enabled by automated processes that can now trawl through financial and welfare records held by agencies.

The measures include a “historical analysis of social services data to apply risk management techniques to better manage and prevent non-compliance by welfare recipients” and a bid to “identify and manage welfare recipients most at risk of non-compliance.”

Claimants attracting attention will also be helped through “faster and more targeted intervention to prompt welfare recipients to address potential non-compliance behaviour, which will minimise the risk of payments being reduced or cancelled.”

Despite a pledge to “require more frequent and more stringent self-reporting” the Coalition argues that the new measures “will make it simpler and less time consuming for welfare recipients to meet their obligations.”

“This will improve the efficacy of the social welfare system, making it better for recipients, less burdensome, less susceptible to fraud and inadvertent overpayments, and more sustainable,” the policy says.


Shrinking pool of funds?

One area of substantial ambiguity in the Coalition’s welfare debt policy is the financial impact of a potential move by the ATO to do away with tax returns for people with simple tax affairs.

In August 2015 ATO Chief Information Officer Janet King publicly floated the possibility of her agency creating a “personalised tax rate” that took account of real-time financial information from customers, including welfare information, and made adjustments on the fly.

If implemented, the system could potentially negate the need for tax returns because straightforward PAYG customers would always be up to date.

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4 thoughts on “Welfare debt crackdown grabs tax return cash

  1. I am an aged pensioner who occasionally works. I moved house four months ago. I went into my local Centrelink at that time and told the nice lady that I had moved. She entered all the details on her computer.

    I recently worked more than I had expected and so I exceeded the Work Bonus amount. I wrote to Centrelink detailing my income. I knew this would mean I had been over paid by Centrelink for that period, and I expected a note about the overpayment. It arrived yesterday, as a result of my letter, which had my current address on it.

    The demand for payment was sent to my previous address, which was inoperative four months ago, as I had told Centrelink. And the only way Centrelink knew about my increased income was the letter I sent headed by my current address…

    Kafka isn’t in it…Australia’s government offices can make surreal seem normal.


    I wrote to Centelink as usual

  2. Government News, do they read thsi.

    I got a compliance letter followed by a debt of $2220.

    i can prove i declared all my earnings, yet there seems little effort in wanting me to prove it.

    Everyone i speak to at Centrelink Compliance just do what is common in the public service, “NOTHING”, Kind of get the feeling they would like me to just go away and pay the debt.

    There are Centrelink Scams, but this is a Scot Morrison, Liberal Government approved Scam, designed to target low income workers in casual employment.

    How about they go and find those who work for dodgy contractors, don’t pay any tax and claim Centrelink payments, Ah yes, That’s way to hard and far to much hard work for the Government to deal with

  3. I received a debt bill of over $9000.00, I disputed this and it was reduced to $2100.00, I still disputed this as I do not have a debt and it was reduced to zero then a week later back up to $1900.00. How can this be reviewed using the same information three times and three different answers and how can they expect people to make payments when they cannot get it right.

  4. Yes because its much easier to go after those People who might be taking money from Centrelink .Than chasing those multi nationals who avoid paying Billions in Tax money in this country.

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