Senior government officials dismissed legal advice that labelled the controversial robodebt scheme illegal, a royal commission has been told.
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The commission examining the Centrelink debt recovery program was told law firm Clayton Utz prepared draft advice on the legality of the scheme in 2018 but it was not acted on.
The draft advice said using annual tax office data to calculate average fortnightly earnings and automatically issue welfare debt notices was not legal.
Former branch manager of the Department of Social Services Allyson Essex told the commission on Friday she raised concerns about the draft advice with superiors but the advice was not heeded.
"I told (the deputy secretary) about the Clayton Utz advice and said 'we've gotten advice that says it's not legal'," she said.
"His response to me was 'it's legal - it's really clear that it's legal'."
Ms Essex said she thought all other options had to be exhausted before income averaging was used as a means to calculate debt.
"I had concerns that it might not be lawful at all. I had definite concerns that the way it was being applied ... was not lawful," she said.
"I had heard the (department) secretary express that income averaging was lawful and that the Commonwealth is on solid ground in using income averaging."
Earlier, department official Kristin Lumley, who was involved in payment integrity, told the commission she was concerned the government would face substantial legal exposure over robodebt because of the lack of independent advice.
In an email to a colleague, Ms Lumley said she was "extremely concerned" the department was sitting on the legal advice and the matter would "definitely end up in the Federal Court".
She told the commission the draft advice prompted the need to urgently brief the minister on the issue as it had whole of government implications.
Former Social Services principal legal officer Anna Fredericks told the commission independent legal advice would have caused "reputational damage" to the government and the departments administering the program.
She said if the independent advice was acted on, the robodebt scheme would have been changed or stopped altogether.
"If independent legal advice had been sought at the time and had full scope and awareness of the program, I have no doubt they would have come to that view (of it being unlawful)," she said.
"It would have undoubtedly led to a redesign or cessation ... it would have likely caused reputational damage to those two departments but also to the government."
The commission is examining why the controversial Centrelink debt recovery scheme was established in 2015 and how it continued until 2019, given it had generated significant criticism by early 2017.
The program recovered more than $750 million from 381,000 people and led to several people taking their own lives while being pursued for false debts.
Ms Fredericks said there was a direction within the department to stick to talking points about the robodebt scheme and a culture of not telling higher-up officials news they did not want to hear.
Royal Commissioner Catherine Holmes said there had been a "certain passivity" among lawyers within the government department at the time it was providing advice on robodebt.
Former ministers Christian Porter and Alan Tudge will give evidence next week.
Australian Associated Press
