Interest Charge Encourages Debts To Be Repaid

The prospect of being charged interest on outstanding welfare debts has encouraged more than 28,000 former Centrelink clients to begin paying back the money they owe.

About half of that group – or approximately 14,000 people – repaid their entire debt in one lump sum, including several individuals who owed more than $20,000 each.

The Department of Human Services announced in April that it was sending letters to about 170,000 former clients who collectively owe taxpayers a staggering $905 million.

The letters inform them they have 28 days to contact the Department and enter into a repayment plan, otherwise interest would be charged until they did.

Of the 45,000 people who are now beyond the 28 day cut-off, almost two thirds (28,000) have begun repaying what they owe. The remaining third are now being charged interest at the rate of 8.77 per cent.

As Minister for Human Services, I am pleased that so many people have agreed to start meeting their obligations. But I strongly encourage those who have refused to engage with us to move swiftly in order to avoid seeing their debt grow even further.

Given that these people are no longer receiving welfare benefits and are predominantly back in the workforce, the Government believes they have the capacity to pay up.

The early results we are seeing support this view and show that the strong action we are taking is justified.

Australia has a generous social safety net that helps people who genuinely need it. But if someone receives a benefit they are not entitled to, the Government has a responsibility to recover these amounts to ensure the system remains viable.

In some cases, debts owed by individuals are more than a decade old and there are people who owe hundreds of thousands of dollars.

This includes people who deliberately defrauded the system and have been prosecuted for their actions.

The amount people are required to pay back under a repayment plan will depend on their individual circumstances and exemptions can be provided for those who can demonstrate genuine hardship.

Charging interest on government debts is also not new. The interest rate will be comparable to other government and non-government entities; currently 8.77 per cent.