Australians who had money taken from them unlawfully in the federal government’s robodebt saga will receive more than $1.2 billion in compensation.
While not admitting legal liability, the commonwealth has agreed to pay $112 million in compensation to about 400,000 individuals as well as legal costs.
The in-principle class action settlement came hours after a Federal Court trial over the scheme was due to start on Monday.
As part of the settlement, law firm Gordon Legal also said the government had agreed to drop $398 million in invalid debts it had been pursing against class action members.
The robodebt saga involved matching Australian Taxation Office and Centrelink data to claw back welfare benefits the government said had been overpaid. There was little or no human oversight of a system that relied on computer algorithms to decide who was entitled to what benefit.
This was last year ruled by the Federal Court to be illegal.
The government had already agreed to refund thousands of people $720 million before the settlement.

Federal Labor frontbencher Bill Shorten was pleased with the settlement but criticised the government for dragging out the case.
“We said it was illegal and the government ignored us. We said it was unfair, the government ignored us. We asked for documents in parliament from the government and they ignored us,” he told reporters.
“Why should people have to go to lawyers, put together a class action just to get the government to obey the law?”
The final detail of the settlement will still require court approval at a later date.
Gordon Legal hopes it will finish distributing the repayments by the end of next year.