Knox Class Action (Facilitation) Bill 2026
Ms CLUTTERHAM (Sturt) (16:54): I rise today to speak in support of the Knox Class Action (Facilitation) Bill 2026. I begin by thanking the member for Barton for her contribution—in particular, the way she highlighted the story of her constituent from Kingsgrove. I know that she has deep levels of empathy and concern for that lady and indeed for all Australians who were affected by the illegal and immoral robodebt scheme.
This bill operates to exempt settlement payments received by members of the Knox class action, which compensates for the harms caused by robodebt from existing Commonwealth statutory recovery schemes and income-testing provisions that would ordinarily apply for recipients of a lump sum compensation payment. The settlement payments will be made to eligible Knox class action members through the settlement distribution scheme approved by the Federal Court in Prygodicz v Commonwealth of Australia.
In particular, the bill exempts these Knox settlement payments from the application of the compensation provisions in the National Disability Insurance Scheme Act 2013 and from the application of the compensation and income-test provisions in the Social Security Act 1991 and Veterans' Entitlements Act 1986. These exemptions ensure that settlement payment recipients will not have to repay any amount to the Commonwealth in accordance with the compensation provisions in those acts and that their receipt of their settlement payment will not be counted as income for the purposes of any income-support payments they are currently receiving.
What was Prygodicz v Commonwealth of Australia about, and what was the Knox and others v Commonwealth of Australia class action? Firstly, in the matter of Prygodicz, six applicants sought approval from the court for the settlement of a class action brought against the Commonwealth for its use of the automated debt collection system between July 2015 and November 2019, which we now refer to as robodebt.
The applicants submitted that the requested settlement would address their claims for unjust enrichment from the Commonwealth in respect of the invalid debts it had raised against them. Robodebt, as we know, was the automated debt collection system which was intended to recover social security payments that had allegedly been overpaid. The robodebt system sought to identify overpayments of social security benefits in a particular period of time through a process called data matching.
The process of data matching was carried out automatically using pay-as-you-go income information of social security recipients kept by the Australian Taxation Office and then evenly apportioning that income over fortnightly increments in the review period. This was known as income averaging, and it was used to determine that person's notional or assumed fortnightly income.
Data matching also involved the comparison of the notional or assumed fortnightly income of the person with the actual fortnightly income information provided by that person, which was the basis upon which the level of social security payments had been assessed and paid. This process then determined whether a person had been overpaid and what the alleged debt was.
In this matter, two claims were prosecuted against the Commonwealth. The second, which I raise only as a matter of completeness, was a common law tort claim in negligence for economic loss as arising from the Commonwealth's alleged breach of its duty of care in raising and recovering debts that had no foundational basis, in addition to damages for stress. The first claim against the Commonwealth, which is relevant to this bill, was a restitutionary claim for unjust enrichment, alleging that the Commonwealth was unjustly enriched by its receipt or recovery of wrongly asserted debts from the applicants and group members.
In the judgement, Justice Murphy noted that during the proceedings the Commonwealth had conceded that it had had no proper legal basis to raise, demand or recover the asserted debts, which were based on the income averaging from ATO data. Evidence put before Justice Murphy illustrated that the Commonwealth had unlawfully asserted debts totalling at least $1.763 billion against approximately 433,000 Australians.
Then, including through private debt collection agencies, the Commonwealth pursued people to repay these wrongly asserted debts and recovered approximately $751 million from about 381,000 of them. Justice Murphy's summary of robodebt is articulate, direct and entirely appropriate. Justice Murphy said that the matter of Prygodicz had 'exposed a shameful chapter in the administration of the Commonwealth social security system and a massive failure of public administration.' He said: It should have been obvious to the senior public servants charged with overseeing the Robodebt system and the responsible Minister at different points that many social security recipients do not earn a stable or constant income, and any employment they obtain may be casual, part-time, sessional, or intermittent and may not continue throughout the year.
Where a social security recipient does not earn a constant fortnightly wage, does not earn income every fortnight, or only works for intermittent periods in a year, their notional or assumed fortnightly income based on income averaging is unlikely to be the same as their actual fortnightly income. It should have been plain that in such circumstances the automated Robodebt system may indicate an overpayment of social security benefits when that was not in fact the case.
Yet, in the absence of further information from social security recipients, that is the basis upon which the automated Robodebt system raised and recovered debts for asserted overpayments of social security benefits. To summarise that, robodebt was an illegal, immoral but deliberate case of maladministration knowingly perpetrated by the former coalition government.
The financial hardship, the anxiety and distress, the suicidal ideation and in some cases suicide that people suffered because of robodebt is truly unforgivable, and the shame that people felt for wrongly being designated as welfare cheats cannot be underestimated. The Knox class action that this bill has regard to is an appeal from the original 2020 robodebt class action settlement, which was launched after a royal commission exposed fresh evidence that Commonwealth officials who ran the debt-raising scheme knew it was unlawful but proceeded anyway.
The royal commission concluded that the scheme was a malicious and spiteful mechanism neither fair nor legal. The government has agreed, quite rightly, to all 56 of the royal commission's recommendations, 52 of which have now been fully implemented. The Commonwealth reached agreement in the Knox class action in September 2025 for the harms caused by the robodebt scheme, with a cohort of approximately 168,000 class action members.
The settlement makes $475 million available to compensate eligible group members, which can be paid as either fixed payments or by individual assessment. The payments are intended to compensate those eligible individuals for a range of economic and non-economic loss types. The settlement was approved on 23 June this year and is the largest class action settlement in Australian history.
What this bill does is ensure that those who are eligible to receive a payment pursuant to the Knox settlement receive that payment in full. Typically, lump sum compensation payments like these might be subject to taxation, income testing arrangements and Commonwealth statutory recovery schemes. That means amounts may be withheld and entitlements to benefits like social security or veterans payments, NDIS supports and aged-care contributions could be impacted.
The general principles of that approach are not changing. But, in recognition of the extraordinary—and, frankly, uniquely terrible—circumstances of the robodebt scheme, an exception is being made. What this government is doing is making that exception because of these circumstances.
It's also an acknowledgement that the system that inflicted harm on people, being interaction with the government social safety net, may lead to retraumatisation if people are required to interact again in order to manage the payments to which they are entitled under this settlement. To take effect, the bill will amend the National Disability Scheme Act of 2013 to exempt Knox settlement payments from recoveries and reductions to the funding of reasonable and necessary supports in participants' plans under the National Disability Insurance Scheme.
It will also amend the Social Security Act of 1991 and Veterans' Entitlements Act of 1986 so that the Knox settlement payments are not classified as income or compensation for the purposes of those acts. Other exemptions will follow, including an exemption from income tax, to be legislated before the end of the 2026-27 tax year. To say that robodebt was a gross failure of public administration is plainly an understatement.
It was a catastrophic failure. Its design and implementation meant it was always going to be a catastrophic failure because of the lens through which it was created. It always considered the social safety net to be a burden—a burden on the economy and thus something to be eliminated.
It also always considered those who used the social safety net as 'rorters': people who were lazy, actively avoiding work and looking to take advantage of public funds, just because they could. Like new mothers who were accused of being 'double dippers', people using the broad social safety net in this country, and who were victims of robodebt, were treated like criminals.
Budget control and debt reduction are important, but there are ways to achieve this without grouping together individual Australians using the social safety net under the umbrella of rorters or dodgy welfare recipients or bludgers. Finding savings in the budget doesn't have to exclusively mean cutting services, reducing support and targeting vulnerable Australians in the hope that they lack sufficient agency and resources to challenge what is happening to them.
That is what robodebt did. It was lazy budget control. No other ideas to reform the budget?
No problem. Vulnerable Australians are available. Robodebt found a group of vulnerable people that they considered easy targets, and the architects of the scheme hoped that they wouldn't say anything or speak up.
Well, some of them can no longer speak up because they're no longer with us. People's lives have been destroyed, in many cases, irreparably. The human impacts of robodebt: families struggling to make ends meet receiving a debt notice at Christmas, like the lady from Kingsgrove that the member for Barton told us about.
There are young people being driven to despair by demands for payment and, horribly, an account of a young man's suicide. This can never happen again, and thanks to many stakeholders, especially the countless victims who did speak up and tirelessly advocated for themselves and others, it won't. And thanks to this bill, those entitled to payment through the Knox class action will receive that payment in full.
I commend the bill to the House.