04/01/2017 12:44 PM AEDT | Updated 04/01/2017 3:09 PM AEDT

Centrelink Saga Making People 'Terrified'

People are receiving incorrect debts of many thousands of dollars.

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A crackdown on Centrelink payments and the issuing of large debt notices to unsuspecting recipients was designed by a "dunderhead" and is leaving people "frightened," federal MP Andrew Wilkie says.

A new compliance system to check welfare payments draws in data from other government agencies such as tax records, rather than having a human assess any discrepancies.

The system, introduced last year, vastly increased the number of compliance checks sent out to welfare recipients from 20,000 a year to 20,000 a week, but Wilkie was among those who savaged for its "absurdly crude" formula.

The Tasmanian MP savaged the saga and the "dud system" on Wednesday, saying it left some of his constituents on the brink of self harm.

"I've had four people now approach me in my office who I would describe as presenting as suicidal and in all those cases we've taken what action we thought was appropriate," he said.

I mean, this is terrifying people, and we've got a government who is saying there is no problem, a government that is crowing about how it will save them money.Andrew Wilkie

"I tell you what, all it's doing is creating enormous anxiety in the community."

Wilkie also took aim at Centrelink for forcing recipients to prove they were entitled to welfare, placing the onus on the person to prove their innocence and avoid having to pay back their payments.

"There is a problem with the philosophy behind it because it is assuming that people are guilty until they can prove themselves innocent," he said.

"These debt notices are going back as far as six years, and often people's employers six years ago aren't even in business, so it is a ludicrous request or demand from, demand or attack from Centrelink that people somehow get hold of pay slips from back to six years ago."

Critics say the system is taking a person's annual income and incorrectly averaging it out over a whole year -- for instance, if a person worked seasonally or only in university holidays and earned $26,000, the system would look at it as though the person had earned $1000 each fortnight for the entire year while still claiming Centrelink.

This, critics say, is what is leading the system to send out debt notices claiming current and former recipients of welfare owe many thousands of dollars for incorrectly taking Centrelink payments -- in some cases, debt notices of up to $24,000.

Social services minister Porter defended the crackdown this week on ABC radio, downplaying the letters sent to welfare recipients and saying they were "not debt letters".

"They are polite letters, the initial letter that goes to the welfare recipient saying that an issue has arisen, that there may be a discrepancy and we require some further information," he said.

Wilkie said he had complained to the Commonwealth Ombudsman, who had informed the MP that it "is in contact and seeking more information from Centrelink".

"It is not good enough for a minister to stand up yesterday or today and to crow about something that is terrifying Australians and bringing some Australians to the brink of suicide," he said.

If you need help in a crisis, call Lifeline on 13 11 14. For further information about depression contact beyondBlue on 1300224636 or talk to your GP, local health professional or someone you trust.