Millions of Aussies could receive up to $600 in compensation over old welfare debts assessed using a method that was not consistent with social security law at the time.

Current and former welfare recipients with eligible debts affected by income apportionment can apply for a one-off payment through the Income Apportionment Resolution Scheme.

The scheme, which opened in January 2026, allows recipients to claim up to $600 for each eligible debt. 

Australians have until January 29, 2027, to apply through their linked Centrelink account on myGov, where eligible debts will be displayed.

At the same time, Centrelink is resuming recovery action on almost 150,000 outstanding historic debts calculated using income apportionment after retrospective legislation made the debts valid and recoverable.

Income apportionment involved averaging a person’s employment income across two or more fortnightly Centrelink reporting periods. 

The method was used from the late 1990s until 2020 and affected an estimated three million Australians, with the debts totalling $4.4 billion.

While millions of the affected debts have been repaid, about 147,000 are still flagged as outstanding, with Centrelink now chasing repayments. 

Current and former welfare recipients with eligible debts affected by income apportionment can apply for a one-off payment through the Income Apportionment Resolution Scheme 

It’s understood that many of the outstanding debts relate to alleged overpayments on social security payments which were handed out more than 10 years ago. 

Recovery action on affected debts was paused because of the pandemic and subsequent questions about the legality of income apportionment. 

Victorian mechanical plumber Matthew Chaplin’s case became a test of how Centrelink could lawfully recalculate a debt relating to retail income he earned in 2014 and 2015. 

The Federal Court found in July 2025 that Centrelink could use an alternative method to determine whether a person had a debt.

In December that same year, the Australian Government passed legislation that validated income-apportionment debts and allowed Centrelink to continue collecting outstanding amounts. 

Meanwhile, the Income Apportionment Resolution Scheme was also established, allowing affected welfare recipients to claim up to $600 in compensation per debt. 

Mr Chaplin appealed to the High Court, which dismissed his case in June 2026 and found his debt could be lawfully recalculated by counting income in the fortnight it was received.

Centrelink has since been resuming recovery action on the debts and sending affected recipients ‘payment due’ notices. 

The High Court of Australia deemed the income apportionment method was unlawful and that  Centrelink could use a different method to calculate whether a person had debt

Victoria Legal Aid’s economic and social rights acting associate director, Miles Browne, argued the government should waive all income-apportioned debts.  

‘There is so much complexity around Centrelink’s debt raising and so many issues the government’s encountered in terms of lawfulness that people just don’t have any confidence that the debt they are paying off is correct,’ Mr Browne told Nine News.

‘In our view, a waiver should have been contemplated and would have been appropriate given the debts had not been properly calculated.

‘These debts were all very old, and in our experience, people were not only just confused, but had a lot of trouble finding the evidence to disprove the debts.’

Mr Browne added that many Australians who have repaid these debts remain unaware of the resolution scheme, despite Centrelink informing current debt holders of the available compensation. 

He said up to three million Australians who had repaid debts affected by income apportionment could be eligible for compensation.

‘No-one’s been told about it, and we’re concerned people aren’t taking it up,’ Mr Browne said. 

A spokesperson for Services Australia explained Centrelink notified affected customers in January 2026 about the resumption of repayments and also informed them of the available compensation through the scheme. 

‘We encourage anyone who might have a debt impacted by income apportionment to apply for the Resolution Scheme,’ the spokesperson said.