The Commonwealth ombudsman has ordered the Department of Employment and Workplace Relations to do a full brief to government on whether the automatic welfare suspensions and cancellations baked into a Coalition-era mutual obligation scheme are backed by “policy or legislative authority”.
In a damning second report on the Targeted Compliance Framework, which began after leaked documents were published by The Saturday Paper showing almost 1000 welfare recipients had their payments unlawfully cancelled, the ombudsman has warned of an “inherent danger” in the system.
He has drawn together a disturbing list of errors, administrative sleights of hand and outright falsehoods from the government agencies involved in administering the employment services compliance framework, even after a year of being on notice to fix it.
“There is an inherent danger in applying what is effectively a default process that automatically shuts down a jobseeker’s receipt of vitally needed income support,” the ombudsman found.
“This is compounded for jobseekers in a vulnerable state who could have difficulty responding in a timely manner in their own interests or who for whatever reason may not have received the notification.”
In an interview with The Saturday Paper, ombudsman Iain Anderson said it was “particularly strange … that providers are making decisions that can have very serious consequences, but there do not seem to be many consequences for the providers when they get it wrong”.
“And within the report, we do actually contrast the very large number of suspensions, and in some cases cancellations, made for perceived failures on the part of jobseekers against the very high rate of overturned decisions on the part of providers for which there seems to be very little done.”
As Anderson found in his report, many of these consequential decisions that can affect a person’s welfare payment are never made by the overseeing departments but by the private providers to whom the work is outsourced – part of a system worth $1.256 billion, almost entirely in fees paid to these third-party providers. Only some of these decisions are officially appealable and yet the government has breathtakingly little oversight of this system.
Even then, the ombudsman discovered, several federal agencies involved in administering the labyrinthine system have made repeated errors that suggest they don’t understand their own legislation and rules or, perhaps worse, that they are reluctant to enforce these rules.
“We could not be assured that DEWR [the Department of Employment and Workplace Relations] maintains effective oversight of decisions made by providers, including through monitoring and responding to inconsistent or inappropriate decision-making by providers,” the report says.
“When we considered this against the unlawful cancellations, it calls into question the fairness and reasonableness of decision-making that resulted in jobseekers losing vital financial support.”
Illustrative of the government’s approach to the system is an app the DEWR claims it built to provide “alerts on known risk areas”, including providers booking dodgy appointments that can penalise jobseekers.
When the ombudsman asked to see it, the department had to admit the app does not yet exist.
“Later in the investigation when we sought further information on this data App, DEWR changed its previous advice, stating that the risk monitoring data App for monitoring TCF [Targeted Compliance Framework]-related data was in fact not complete and was expected to be gathering data by late 2025,” the ombudsman wrote.
The ombudsman revealed a catalogue of other examples where the department or Services Australia, which administers the welfare cancellations and occasionally checks the work of providers issuing suspensions, made misleading claims to his office, to him, to jobseekers and to the public.
The DEWR told the ombudsman, for example, that participants “may appeal provider … decisions that impact their payment by seeking a review by Services Australia”.
As the ombudsman noted, however, this statement “appears at odds” with the original advice – and the legislation – in which it is clear that “many provider decisions are not generally appealable”. This is because they are classed as administrative decisions and not legislated decisions under social security law.
“Though providers are not the final decision-makers for the cancellation of a job seeker’s income support, provider decisions play a pivotal role in determining whether job seekers move from the Green and into the Warning or Penalty Zone,” the ombudsman wrote.
“How a provider’s decision could lead to a catastrophic outcome is demonstrated through the unlawful cancellation decisions identified in Report 1. In this instance, all 964 job seekers who had their income support cancelled were engaged with a provider whose decisions may have led to the job seeker finding themselves in the Penalty Zone.”
Even where a jobseeker is able to legally review a decision, the ombudsman criticised the agencies for burying the detail in fine print or simply not telling people about it.
“We are making people jump through hoops, rather than actually assisting people…”
“We also observed a Services Australia officer failing to offer a job seeker a right to review the decision the officer made to impose a penalty,” the ombudsman said. “This was noted in 1 of the 4 mutual obligation failure investigation recordings we viewed.”
In another salvo, the ombudsman blasted the “misleading” claim made by Services Australia to jobseekers, in which the department said it could have their payments cancelled even while cancellations had, at the time, been halted for six months due to the discovery of unlawful practices within the system.
Despite this direction to halt cancellations, the suspensions that precede cancellations have never been paused.
These are on the rise again, even as investigations into the system continue. The number of suspensions made and upheld by Workforce Australia providers increased by 23 per cent to 618,000 in the September 2025 quarter, up from 504,000 in June. There were 2.7 million suspensions issued in the year to June, for a caseload of almost 900,000 people across the largest programs.
Antipoverty Centre spokesperson and JobSeeker recipient Jay Coonan said the ombudsman’s findings “show that this is a system in crisis”.
“For too long, welfare cops have avoided accountability while being gifted billions of dollars in public money to surveil, torment and punish welfare recipients,” he said in a statement.
“Payment suspensions cause immeasurable damage to our lives, destabilising people when we are already struggling to survive. This scandal must end, not when the government decides what tweaks it would like to make to this system, but now.”
At the pointy end of this system is the welfare cancellation that can follow a suspension – and during which a jobseeker must wait at least four weeks before being able to be reconnected to an entitlement – for what the government deems “persistent mutual obligation failures”.
These are investigated by Services Australia after a series of non-reviewable “demerits”, issued by providers, that lead to a “capability assessment”, also non-reviewable. If the agency agrees with the provider, jobseekers’ payments are cut off until they “re-engage” with their obligations.
Of the 18,170 “purported persistent mutual obligation failures” that Services Australia investigated between April 1, 2022, and July 4, 2024, some 27 per cent were overturned following a discussion with the jobseeker. In 7 per cent of those cases, the government found there wasn’t even a failure: the jobseeker had been working, or was never notified of the requirement, or was there on time at the appointment they were accused of missing.
Private providers are paid per contract and per placement, with bonus outcomes for different levels of job or training milestones. These arrangements are made more profitable by the compulsion, under threat of sanction, of unemployed people to sign up to activities under the watch of the provider that profits from them.
According to the ombudsman, however, the DEWR’s own review in early 2024 found more than half of all capability assessments conducted by providers were inadequate and did not follow correct procedure. Additionally, the department removed almost one-fifth of “compliance events” made by a provider against a jobseeker.
“By its very nature, the financial pressure of suspension puts the job seeker in a vulnerable position. Even if a suspension ends up being lifted without a financial consequence, this is likely to be significantly stressful for job seekers, given their very precarious financial position,” the ombudsman found.
“We consider this financial pressure lessens the fairness of the TCF process the job seeker is required to navigate.
“[These overturned decisions] suggests a large percentage of job seekers have their payments inappropriately suspended, given they had reasonable excuses for not complying with their mutual obligation failures.
“We discuss this issue further in respect to the role of providers in the TCF, however, this percentage lends weight to the argument that job seekers in the Penalty Zone should not be immediately suspended from income support.”
In these circumstances, the ombudsman notes, “many job seekers are unlikely to find ongoing employment no matter how hard they try to comply with the requirements placed upon them”.
Anderson tells The Saturday Paper that “it needs to be understood that many people will not be able to get a job no matter how many obligations they comply with, given the rate of unemployment at the moment.
“We are making people jump through hoops and, rather than actually assisting people, the providers are setting plans for people that they’re incapable of actually complying with.”
The peak body for community legal centres that help social security recipients, Economic Justice Australia, which is chartered to provide expert advice to government on reform, is one of 14 major welfare organisations calling for the abolition of all Centrelink payment penalties and the Targeted Compliance Framework.
“Reading through the results of this investigation, it is clear just how little regard for human life is had by private service providers, who are in fact incentivised to mistreat people receiving Centrelink payments,” the organisation’s chief executive, Kate Allingham, said in a statement.
“It is also clear that neither DEWR nor Services Australia have the ability to administer the employment services system in a way that is fair to the many hundreds of thousands of people who access these payments.”
Still, after much prodding, the Department of Employment and Workplace Relations misunderstands what the ombudsman is asking of it. In response to recommendation six, to “review the automatic process to suspend a jobseeker’s income support in the Penalty Zone”, DEWR secretary Natalie James said the department would consider options for giving recipients five business days to “resolve” the matter but said any change would have to be a government decision.
Anderson wrote to James on December 8 to explicitly record that this was not nearly enough.
“While I appreciate that any proposal to change legislation will be a matter for government, this recommendation goes to DEWR’s review of the automatic process within the TCF system, including considering whether any policy authority, or legislative change, is required to implement it,” he wrote.
“My staff will monitor DEWR’s progress on these matters in reviewing whether it has implemented this recommendation.”
Whether a government program has authority to exist was a critical question at the heart of robodebt, which had none, and has cost lives and livelihoods in addition to billions of dollars in compensation eventually offered by the Commonwealth during legal action.
When asked by The Saturday Paper whether government agencies still appear not to understand the policy they are supposed to oversee, Anderson said, “That is probably a fair thing to say.
“It’s slightly concerning to be given conflicting pieces of advice by them,” he said this week. “You would hope that they had a very clear pathway to getting better at this and fixing any errors and being able to have better data to make better decisions.
“So, yeah, it is concerning that they are still having to correct themselves. It is up to them to give advice to government. The recommendation is that both agencies review the automatic process. They’re not off the hook. If the government says it’s not going to legislate, there might be things that can be done short of legislation.”
Iain Anderson ended his interview with The Saturday Paper with a warning for all public servants, and by implication ministers, after the horror of robodebt, a saga that swept the ombudsman’s office into calamity under a former leader for allowing itself to be deceived by agencies it was investigating.
“I think, if you do go back to robodebt, what we did have was years and years of the public service being told, ‘Just do what you’re told to by ministers.’ And for some people, that’s a hard lesson to unlearn,” he says.
“It’s a work in progress for the Australian Public Service in rebuilding itself and recapturing the core craft of being a proper public servant and to get back to the notion that, actually, the public service needs to act with integrity in everything it does.”
The Department of Employment and Workplace Relations told The Saturday Paper it “began using the [risk] app this month for ongoing monitoring of the application of the Targeted Compliance Framework by providers.”
This article was first published in the print edition of The Saturday Paper on
December 13, 2025 as “‘Particularly strange’: Ombudsman damns welfare compliance”.
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