Hundreds of thousands of Australians received letters from Centrelink beginning in 2015 telling them they owed the government money for welfare overpayments in a controversial program that was later ruled illegal.

Social Services Minister Amanda Rishworth said around 124,000 individuals received a letter informing them their debt was under review - reviews that were halted before they could be completed. Another 73,000 were never notified they were under review.

"The robodebt fiasco is something that should be of deep concern to all Australians. It was meant to save money, however, we know it had a significant human cost," she said.

"Individuals felt increasingly anxious, depressed, and worried because these debts kept coming and they couldn't understand them."

A class action law-suit on behalf of victims was settled with the former government for $1.2 billion.

People who will have their reviews wiped will receive a letter, Ms Rishworth said.

The government felt pursuing any legitimate debts from the suspended reviews would be challenging and not fruitful and was likely to be a significant burden on the past and current employers of the 197,000 individuals in order to obtain the required information.

Ray Griggs, the secretary of the Department of Social Services, has chosen not to pursue the debts on the basis that doing so could undermine public confidence in the social security system, and calculating whether the government would see any budget saving would itself not be cost effective.

Government Services Minister Bill Shorten said the letters were "dodgy debts" used in "an illegal shakedown" of vulnerable Australians, but a clear picture would emerge of what the key architects of the scheme knew as a new inquiry gets underway.

A royal commission instigated by Labor into the scheme began last week, and the first round of hearings will commence in the next several weeks.

Former Queensland Supreme Court chief justice Catherine Holmes, who chairs the royal commission, said the focus "will be on those in senior positions, who had or should have had oversight."

The inquiry will also look at the use of third-party debt collectors by Centrelink, and why warning signs about the scheme were ignored by a string of Coalition ministers.

More than $750 million was wrongfully recovered from 381,000 people before it was shut down in 2019.

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Debt notices were issued to people identified through income averaging, which compared their reported income with official tax office figures.

Some welfare recipients said they had been falsely accused of owing money or had been asked to repay more than they owed.

Remaining debt reviews were put on hold in 2019 when the Federal Court of Australia ruled the scheme unlawful. Progress on the review would have been unlikely, as most cover debt periods between six and 10 years ago, by which time employers may no longer hold the information required.

Then prime minister Scott Morrison extended an apology for any "hurt or harm" in how the government has dealt with the issue, echoing the apology offered by former Department of Social Services secretary Kathryn Campbell, the top official who oversaw the scheme.

"I would apologise for any hurt or harm in the way that the government has dealt with that issue and to anyone else who has found themselves in those situations," Mr Morrison said in 2020.