Services Australia blundered $5bn in pension payments in 3 years, audit finds

A report by the Australian National Audit Office (ANAO), released on Tuesday (27 January), reveals that Services Australia overpaid $3.67 billion in pension payments, and underpaid $1.33 billion over the three years to June 2024.

Undeclared or incorrectly declared assets were the largest contributor to the incorrect pension payments, responsible for almost 75 per cent ($3.71 billion) of incorrect payments over the three years.

The audit office said the high rate of inaccuracies in Services Australia’s pension payments pointed to “poor stewardship” of public resources.

The age pension constitutes a significant chunk of the government’s budget, with $62.2 billion outlaid in 2024–25 to 2.67 million recipients. It made up almost half (42.5 per cent) of the government’s social security budget, and 8.4 per cent of the total federal budget.

The ANAO urged Services Australia to boost its compliance activity to deter recipients from incorrectly declaring assets and over-claiming government benefits.

“Not having compliance activities to directly address known significant risks points to poor stewardship of public resources,” the audit report read.

“To safeguard the integrity of the age pension program and promote the interest of taxpayers and beneficiaries, Services Australia’s compliance activities should effectively deter applicants and recipients from not fully disclosing their circumstances that impact age pension eligibility.”

Services Australia also struggled to meet its own pension payment deadlines over the three years to June 2024, ANAO found. The government aimed for a timeliness performance target of having at least 80 per cent of claims being completely assessed within 49 days, but failed to meet this target in any quarter.

Its best performance was in the Q3 2021–22, where it finalised 79.4 per cent of claims within 49 days. Its worst quarter was Q3 2023–24, where only 38.6 per cent of claims were completed within the desired time-frame.

Services Australia reported that it did not meet its timeliness targets as age pension claims were complex, and it took time to gain staff proficiency in processing such claims, in its 2022–23 annual assurance statement.

It added that staff resources were diverted to other priorities as the organisation sought to “maximise available resource efficiency and balance the performance of programs.”

The following year, in 2023–24, additional government funding boosted Services Australia’s frontline staffing and helped reduce a backlog of welfare claims. However, the ANAO observed that this reduction was not observed in the age pension.

“Process deficiencies”, including faulty means testing and IT errors, were other culprits contributing to the payment errors, the audit found.

For example, in May 2019, an applicant transferring to the age pension had their superannuation assets incorrectly excluded in assessing their eligibility for the pension, leading to overpayment of government benefits.

Services Australia identified that 175,032 pension recipients had been impacted by this particular issue since 2010, with an estimated overpayment of $37 million.

The ANAO noted that policy complexity in calculating income and asset assessments was a ‘systemic factor’ that had led to delays in fixing this recurring issue, as it barred staff from double-checking automated system calculators and picking up on errors.

To address payment integrity issues in the pension system, ANAO made nine total recommendations to Services Australia, the Department of Social Services and the Department of Veteran Affairs, all of which were accepted.

These included better disclosures of limitations and risks, stronger compliance processes to address payment accuracy and timeliness issues, and better processes to verify pension applicants’ assets and income to improve the accuracy of claims assessments.