The Turnbull government has admitted it issued robo-debt recovery notices to 20,000 welfare recipients who were later found to owe less or even nothing.
Documents presented to Parliament by Human Services Minister Alan Tudge showed the use of automated data matching processes by Centrelink and the Department of Human Services resulted in 19,980 debt notices being issued, all of which were either reduced or rescinded.
Data to March 31 showed a total of 12,524 people had their robo-debt demands reduced to a smaller amount, while a further 7456 people were found to have no legitimate debt.
In a response to questions from Labor backbencher Steve Georganas, Mr Tudge said NSW had the most debts reduced to zero, with 2234, while another 3644 debts in the state were reduced.
Victoria had 1894 debts reduced to zero, ahead of Queensland with 1665 and Western Australia with 646.
Victoria had 3306 debts reduced but not completely rescinded, with 2718 in Queensland and 1609 in Western Australia.
The ACT had 100 debts reduced to zero, and 169 debts reduced to a smaller amount.
The number of altered robo-debt notices is likely to have grown in the past six months, and only represents instances where welfare recipients have challenged the amounts.
The government said debt reassessments could take place multiple times.
Labor's human services spokeswoman Linda Burney called the figures "absolutely shocking".
"This is the government finally telling the truth and finally admitting that they sent out 20,000 letters to people accusing them of owing money that they did not owe," she said.
"These questions will be pursued by the Labor party with the government. It is just an outrage that so many people were accused. It is incompetence that so many people were accused of owing money that they did not owe."
Among the suburbs with the largest number of debts reduced to zero were Bundaberg, Mackay, Toowoomba and Cairns in Queensland, Gosford in NSW and Cranbourne, Ballarat and Werribee in Victoria.
The areas with the most debts reduced include Bundaberg, Cranbourne, Toowoomba, Cairns and western Sydney suburbs including Mount Druitt, Liverpool and Campbelltown.
Labor, the Greens and social services agencies have been critical of the automated data matching process since late-2016.
The tax records of welfare recipients are compared with the levels of pay they reported to Centrelink. Income is averaged over 26 fortnightly reporting periods, leading to distortions and incorrect assessments of recipient's entitlements.
The government maintained the system was working effectively, despite a critical report from the Commonwealth Ombudsman published in April.
The probe found demands on recipients were neither reasonable nor fair, highlighting serious deficiencies caused by the Department of Human Services failing to properly consider the issues involved in moving to a system without human oversight.
Acting Ombudsman Richard Glenn found 20 per cent of people sent an initial "request for information" letter were able to prove they owed nothing to the welfare agency.
Labor has called on the government to act on 21 recommendations from the Senate committee, which said the process should be immediately stopped.
It found the program had a "profoundly negative impact on the lives of thousands of Australians."