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Minister for Government Services Stuart Robert announced"refinements"of its debt-recovery program on Tuesday. — Minister for Government Services Stuart Robert announced "refinements" of its debt-recovery program on Tuesday.Credit:Alex Ellinghausen

Welfare groups have been calling for the process of"income averaging"to be abolished,arguing it is unfair and inaccurate.

With the government facing apotential class action challenging the legality of its income compliance program,Mr Robert said Centrelink would also"reach out"to the"small cohort"of Australians who had received debt notices based solely on income averaging to"seek further points of proof".

During a Sydney press conference,Mr Robert did not elaborate on how many people were in the"small cohort"or the potential budget impact.

But a Services Australia (which includes Centrelink) submission to a recent Senate inquiry suggests it could conservatively involve more than 220,000 cases.

According to the government,it has identified 734,000 cases of overpayment since July 2015. The submission notes that during income-compliance decisions,about 30 per cent of people do not engage with Centrelink's requests for further information and another 30 per cent start the process but do not finish it. Services Australia said in the absence of any further information provided by a customer,"we have used income averaging to determine the overpayment".

A departmental statement on Tuesday said income averaging"only applies to a very limited proportion of debts".

Aninternal email sent to departmental staff on Tuesday also signalled the onus of proof would no longer be on welfare recipients to prove they didn't have a Centrelink debt. But Mr Robert denied there was a change in the onus of proof and said the department would continue to use income averaging"with other proof points,as the basis to identify the possibility of a debt".

In September,Melbournelaw firm Gordon Legal flagged a class action on behalf of clients who had had Centrelink benefits clawed back under the controversial program since mid-2016. Legal Aid Victoria haslaunched a test case against it in the Federal Court amid claims more than 500,000 former welfare recipients had been ordered to pay debts that could be incorrect,or not owed at all.

According to the government,the"income compliance program"has identified about $2 billion in overpayments since 2015. It has been able to recover more than $785 million,with a further
$725 million under a"repayment arrangement".

Mr Robert said the government makes"no apologies for fulfilling our legal obligations to collect debts with income compliance".

Labor's spokesman for government services Bill Shorten described Tuesday's announcement as a"complete backflip"and an"admission of chaos".

The Australian Council of Social Service,which has been calling for the scheme to be abolished,said"the devil will be in the detail".

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