Almost 200,000 robodebt cases to be wiped as Albanese government condemns ‘shameful’ scheme

Nearly 200,000 Australians will have their robodebt reviews wiped as the federal government scraps investigations that were put on hold for three years under the unlawful welfare scheme.

About 124,000 people were told they were under review for social security payments they had received, while 73,000 were never informed they were being assessed for potential debts under the data-matching program.

The 197,000 people will soon receive letters informing them the investigations will not proceed, after the social services minister, Amanda Rishworth, confirmed her department wouldn't continue them.

"We're committed to a better Australia and that means delivering a social security system that is not punitive," she said.

The 197,000 people had reviews of their income and welfare payments commenced, but not finalised, before the cases were put on hold in 2019 after concerns about the robodebt system prompted the federal government to stop raising debts solely from that mechanism.

The data-matching system, referred to by critics as robodebt, identified potential overpayment to welfare recipients by averaging out income from tax office data and comparing it to social security payments. The former Coalition government ceased using that system, later refunding debts raised in that manner.

The federal court later found the system to be unlawful and approved a $1.8bn settlement with victims of the scheme.

The Labor government in August announced a royal commission into the robodebt scheme.

On Wednesday, the government was expected to announce the 197,000 cases would officially be wiped. The government said the secretary of the Department of Social Services now had no obligation to chase the debts, citing a time-consuming exercise that would not be cost-effective, and negative effects on public confidence in the social security system.

The cases relate to periods up to 10 years ago, meaning employers may not hold payroll information needed to review the cases. Guardian Australia also understands that since the reviews have been on hold for more than two years, the government believes future engagement with people involved may be difficult.

"The robodebt fiasco is something that should be of deep concern to all Australians. It was meant to save money, however we know it had a significant human cost," Rishworth said.

"I'm pleased the Albanese Labor government can take further action to ensure 197,000 Australians have reviews wiped so they don't have to be subject to that stress."

The government services minister, Bill Shorten, said the Labor government was committed to "cleaning up another part of the Liberals' shameful and illegal robodebt scheme".

"We are removing any doubt that has been hanging over the heads of robodebt victims for almost a decade," he said.

"These dodgy debts were raised by the former government in an illegal shakedown against some of the most vulnerable to underpin their discredited surplus forecasts."

The royal commission will hold its first public hearings on 31 October. Shorten said the process would "get a clear picture of what the key robodebt architects knew".

People whose potential debt is scheduled to be scrapped will receive a letter confirming those details, or can call 1800 171 846 to ask if they are included.