Robodebt payouts not taxable, says ATO

The income compliance class action (also known as the Robodebt class action) relates to Centrelink debts raised by income compliance reviews since July 2015.

The Robodebt scheme, which was subsequently ruled unlawful, was rolled out in 2015 and used an automated system that measured a person’s average income to claim $1.7 billion in alleged debts from 433,000 Centrelink recipients.

In 2020, the federal government had to refund $721 million in debts that had been wrongly collected from 381,000 people.

And it paid $1.8 billion to settle a class action brought against by victims of the scheme but set aside just $112 million in compensation that equates to less than $300 per person affected.

On 11 June 2021, the Federal Court approved the settlement of the class action. Eligible participants in the class action should have a letter from Services Australia.

If clients receive a settlement payment because they were an eligible participant of this class action, they don’t need to declare the settlement payment in their tax return or pay tax on this payment.

Robodebt victims found out on Tuesday (6 September) how much their share of a $112 million settlement payment awarded as part of a $1 billion class action will be. 

However, it has been reported that most of the eligible 400,000 or so class action members — almost half — will receive less than $100.

Around 30 per cent of class action members will be paid between $100 and $300. 

A small minority, about 5 percent, of Robodebt victims will receive more than $1,000.