Australia’s mutual obligation system, designed to ensure jobseekers fulfil specific requirements to receive benefits, is under intense scrutiny following revelations of IT failures and unlawful payment cancellations.
The government has launched multiple reviews, while advocacy groups call for an immediate suspension of the penalty zone system, citing concerns about fairness and legality.
Legal Uncertainty and It Failures Raise Concerns
The Department of Employment and Workplace Relations admitted last week that it could not confirm the system was functioning within the law. An IT error led to $1.2 million in repayments to 1,280 jobseekers who were wrongly penalised.
Additionally, 964 individuals had their payments unlawfully cancelled between April 2022 and July 2024, prompting the government to suspend further cancellations while it investigates.
The compliance framework, which ranks and penalises jobseekers for failing to meet mutual obligation requirements, is now under review by Deloitte and the department itself. Officials have also confirmed reports that ten affected individuals had died before they could receive repayment.
While the cause of these deaths remains unclear, the revelation has heightened criticism of the system’s flaws.
Department Secretary Natalie James told a Senate estimates hearing that she had “concerns about the alignment between the legal framework and the system”, leading to an internal legal review.
She issued a formal apology, acknowledging that the government could not guarantee jobseekers were being treated fairly under the current framework.
Calls for Suspension and Reform Grow Louder
The revelations have sparked widespread calls for the immediate suspension of the penalty zone system. Economic Justice Australia (EJA), an organisation advocating for social security reform, has urged the government to act, arguing that the complexity of the system makes it difficult even for officials to navigate.
EJA’s chief executive, Kate Allingham, said jobseekers were often left in bureaucratic limbo, bounced between Services Australia, the Department of Employment, and private employment service providers. She described the system as “overly complicated”, leaving individuals without payments for extended periods.
Anti-poverty advocate Jeremy Poxon has gone further, calling for the complete abolition of the compliance framework. He said payment suspensions and cancellations cause “untold harm”, particularly to the most vulnerable, who live in constant fear of losing financial support.
The Commonwealth Ombudsman is now investigating whether income support cancellations were made lawfully, fairly, and reasonably. While the ombudsman cannot enforce changes, he may recommend reforms to ensure jobseekers are not unfairly penalised.
