Announcement date
4 September 2025
Link to announcement
Social Security and Other Legislation Amendment (Technical Changes No. 2) Bill 2025
Problem being addressed
Income apportionment was a long-standing practice, dating back to the early 1990s, adopted to calculate social security debts for some people who earned employment income and received a social security payment. Use of the practice ceased in December 2020, when legislative changes made assessing employment income much simpler.
The historical use of income apportionment is now understood to be generally unlawful.
Around 5.5 million social security debts, held by around 3 million people and worth a total of $4.4 billion, are potentially affected by income apportionment. It is only possible to know which debts are actually affected through a manual review of each individual debt. Around 97% of the debts are fully repaid. The average age of the debts is 19 years.
Waiving or recalculating affected debts (using the method endorsed in a recent Full Federal Court outcome) would mean reopening debts many years old, causing distress and protracted uncertainty for the people affected and take thousands of officials working many years, diverting critical government resources from frontline services.
Proposal
The Impact Analysis (IA) considers a number of options for resolving historical debts calculated using income apportionment:
- status quo
- waiving all potentially affected debts
- identifying and recalculating all affected debts
- retrospectively validating income apportionment
- retrospectively validating income apportionment and a partial waiver of debts subject to the income apportionment-related pauses
- retrospectively validating income apportionment and a resolution scheme for those affected.
The analysis of available options in the IA supports an approach that involves legislation to retrospectively validate income apportionment and a resolution scheme for people affected by this issue.
Legislation to retrospectively validate income apportionment provides certainty and recognises it was a nonetheless reasonable means of assessing a person’s entitlement to income support, using evidence such as the person’s payslip, as part of calculating a debt. The practical impact of retrospective validation on individuals is minimal, as it will simply confirm an existing debt amount. Most people will not need to do anything. Any future debts raised relating to pre-December 2020 periods will be treated consistently, using income apportionment, as it will have been made a valid method of raising debts. Debt processing would recommence, as required by law, for the approximately 160,000 debts subject to income apportionment-related pauses. This will end the uncertainty of these pauses for people with these debt activities. This would be accompanied by a resolution scheme, to provide people with a debt affected by income apportionment a simple way of seeking fair and reasonable compensation from the Government.
Assessed Impact Analysis outcome
Adequate
Assessment comments
The IA addresses the seven IA questions and follows an appropriate policy development process commensurate with the significance of the problem and magnitude of the proposed intervention. To be considered ‘good practice’ as per the Australian Government Guide to Policy Impact Analysis, the IA would have benefited from further detailed quantification of costs and benefits, further discussion of stakeholder feedback and a more detailed evaluation plan.
Regulatory burden
The Department of Social Services estimates the Resolution Approach for Income Apportionment will increase average regulatory costs by $5.87 million per year, over ten years.