The “robodebt” scandal, which ran from 2015 to 2019, caused such distress to job seekers, pensioners, students and carers that some considered suicide.

It also allegedly pushed two young men to take their own lives.

Yesterday’s settlement, subject to approval by the federal court, will pay A$475 million (US$310 million) in compensation to those affected by the scheme.

“It would be the largest class action settlement in Australian history,” the attorney-general’s office said in a statement.

“Settling this claim is the just and fair thing to do,” attorney-general Michelle Rowland said.

“The Royal Commission described Robodebt as a ‘crude and cruel mechanism, neither fair nor legal’,” Rowland said.

“It found that ‘people were traumatised on the off chance they might owe money’ and that Robodebt was ‘a costly failure of public administration, in both human and economic terms’,” she said.

The settlement will be paid on top of a 2020 class action settlement, when the government agreed to pay A$112 million in compensation to around 400,000 people.

The “robodebt” scheme used income averaging – comparing a person’s reported income with their income as measured by the Australian Tax Office – to automatically issue notices to welfare recipients saying they would have to repay some of the benefits they had received.

However, the system was faulty, resulting in hundreds of thousands of people receiving demands to pay back money they did not owe.