The Australian Taxation Office (ATO) told the Department of Human Services (DHS) to “cease and desist” with the use of taxation data for the purpose of sending automated debt recovery letters to welfare recipients during the infamous Robodebt scheme, a Royal Commission has heard.

In an email from July 2017 presented as evidence last week, Tyson Fawcett, who is currently a Director of Data Management with the ATO, said he was “seeking an assurance" about how data would be “used with any future bulk compliance processes”.

Fawcett had called “an urgent discussion” around how the DHS was using data and went so far as to ask the department to “cease and desist the usage of the data until we have your assurance around the data use”.

The evidence was brought up during an examination of Jeremy Hirschhorn who appeared in the Royal Commission witness stand on behalf of the ATO.

Justin Greggery Senior Counsel Assisting described the phrase “cease and desist” as “the strongest phrase we have seen from all of the material gathered by the ATO to date” – a statement to which Hirschhorn agreed.

Yet back in 2017, the DHS responded by saying the work it had been commissioned by the government of the day required the data and that it needed to continue.

"There are currently a range of measures the government has asked us to deliver which rely on data-matching capabilities of our organisations,” the DHS said.

“This work needs to continue.”

Greggery suggested the DHS was “leveraging some political weight” in order to push back against the ATO’s question of whether its data was being used lawfully.

Hirschhorn said it wasn’t clear if Fawcett took issue specifically with the legality of data use “or whether it may well be against an ethical use”.

Either way, Fawcett wasn’t happy the data it had shared with DHS for more than 20 years for the sake of identifying discrepancies in reported incomes was now being used to automatically raise debts without human oversight.

Robodebt was an attempt to recover more than $1 billion and saw a massive shift in scale for the department’s debt recovery arm which went from sending 20,000 compliance letters a year to 20,000 letters a week during the scheme’s ultimately doomed operation.

People who received automated notices were shocked and confused by sudden debts they found they had incurred by accurately reporting their own income data to Centrelink.

Fighting against the scheme was a bureaucratic nightmare and it took people who were willing to take on the government and prove it was unlawful in the Federal Court before the scheme was finally unravelled.

Part of the reason Robodebt got as far as it did was an underlying assumption that other departments were acting lawfully – even when the functional use of data sharing agreements, for example, were altered.

“We would approach a question assuming that another agency is operating on a lawful basis,” Hirschhorn said.

Greggery agreed that this was indeed a “reasonable assumption” but questioned Hirschhorn about whether the ATO tried to validate that assumption given the changes in how the data was being used and “in respect of a high volume of taxpayer information”.

“No,” Hirschhorn replied. The ATO hadn’t sought assurance that the data it was sharing was being used lawfully in the administration of this new scheme.

The Royal Commission has so far shown the extent to which Commonwealth departments failed to heed early legal warnings about the lawfulness of using income averaging to raise debts against some of society’s most vulnerable people and neglected to ensure that large swathes of taxpayer data were being used in good faith.