Farmers who the Morrison government says were “acting in good faith” when they underestimated their income will have $51m in income support debts waived.
Labor on Thursday pledged to support a bill that will waive the farm household allowance debts of 5,300 farmers and their partners, following an overhaul of the income reporting process.
But the parliamentary library and other policy analysts have noted the reprieve differs from the government’s more hardline approach to debt recovery for those on other social security payments.
Under the farm household allowance program, farmers and their partners can receive a fortnightly payment equivalent to the jobseeker payment if they meet an income and assets test.
Recipients must estimate their business income, which was previously compared to their tax returns or other financial statements at the end of the financial year. This resulted in a top-up payment or a debt.
But the government has since scrapped this process and will instead only audit a “sample of recipients” after a 2018 review criticised this so-called “business income reconciliation” process.
The government argues the waiver for farmers is appropriate because farmers were “acting in good faith” and the system was overly complex given the “volatile” nature of farming income.
Prof Kay Cook, a social security expert at Swinburne University of Technology, did not oppose the debt waiver for farmers but said it showed “vastly different treatment for benefit recipients in a similar situation”.
That was because, like farmers who accrued debts for inaccurately estimating their business income, those receiving payments such as the family tax benefit and childcare subsidy are also required to estimate their annual income.
Figures provided to a Senate committee showed that under the family tax benefit reconciliation process 117,166 people were hit with a debt in the 2019-20 financial year. That was equal to 9% of those who had their family tax benefit reconciled.
Cook said single parents on family tax benefit part A payments also had varying income, particularly from sources such as child support.
This could “vary wildly” if their “ex-partners do not lodge their tax return”, she said.
“In these cases, women can be retrospectively deemed to have received too much FTBA and are required to pay it back,” Cook said.
“Like farmers predicting crop yields and prices, it is equally difficult for women to estimate child support income that they have no oversight or control over.
“They are similarly acting in good faith, but they are vigorously pursued by the government to pay this money back.”
Terese Edwards, the chief executive of the National Council for Single Mothers and their Children, said there were more than 200,000 customers in the child support scheme who had not lodged a tax return for two or more years.
She pointed to a case where a woman was left with a family tax benefit debt after her ex-partner finally lodged six years of tax returns, which altered his child support liability.
The reprieve for farmers comes after a court last week approved a $1.8bn settlement in the robodebt class action that prompted the government to finally repay unlawfully raised debts.
In the case of farm household allowance, the debts were raised legally but the government is choosing to waive them.
The assistant treasurer, Michael Sukkar, said this month farmers had been asked to “make difficult predictions about this income for the year ahead” under the old process.
“When farmers, acting in good faith, got this wrong, [the business income reconciliation process] would make them liable for a debt,” he said.
Sukkar said it would give farmers “breathing space” to “recover from the drought, bushfires, floods and global pandemic”.
The move will cost the budget $51m in foregone overpayments and $65.6 million in total.
Debts arising from other sources such as undeclared wages and rental income won’t be waived.
Last year, the government also changed the way jobseekers and other benefit recipients report their fortnightly pay income because the old system was “confusing” and “onerous”.
Since 2015, hundreds of thousands of people have misreported their fortnightly income through this process, which required them to calculate their income when it was earned, rather than when it was received and reported on their payslips.
These debts are not being refunded as part of the robodebt settlement because the government says the money is owed.
