It is reviewing payments and looking for people who were given too much and didn't own up.

Centrelink is talking tough, tougher than ever before, and that means jail for those caught out.

Australia wide it's had debt collectors chasing recipients for $2.8 billion worth of overpayments.

More stories from Today Tonight

• Centrelink's new Basics Card
• Author accidentally admits $200,000 Centrelink rort
• Centrelink cracks down on cheats

The new law is retrospective as far back as March 20, 2000.

If you didn't notify Centrelink anytime over the past twelve years of changes in circumstance that might affect your entitlements you could face time.

Lara is a single mum and on the Parenting Payment. She worked for a time three days a week and told Centrlelink, even lodging her tax return with them.

More stories from reporter Clare Brady

She's already paid back $3500 for what she maintains was Centrelink's mistake in 2008.

Now she lives in fear.

Lawyer Kristen Hilton is the white knight taking on this new law.

“The law doesn't make the proper distinction between someone who has deliberately set out to be deceptive, and defraud the system, and someone who has made a genuine mistake and whose circumstances should be taken into account,” Hilton said.

“Our position is that retrospective laws,particularly retrospective criminal laws, are contrary to the rule of law. It’s contrary to our basic system of someone having a fair go.”

Hilton might not look like the warring type, but the lawyer is taking the fight all the way to the High Court in a battle based on principle.

The legal aid lawyer is defending the single mum accused of welfare fraud even though most of the Centrelink money was paid back.

“Kelly was charged with social security fraud under this new legislation, and at the time Kelly was a single parent trying to raise three kids, and she was working in a permanent part time job. She received an overpayment so she had failed to tell Centrelink that her hours had changed,” Hilton explained.

If the case is successful it could cast doubt over more than 15,000 convictions.

The argument is that the law makes an offence of something that wasn't an offence when it happened.

“She was overpaid an amount of $6900 over a period of about five years. Now she has subsequently paid the majority of that money back, but in accordance with this new legislation she's also able to be prosecuted for fraud. That could mean getting a criminal conviction against her name, which has all sorts of implications for future employment prospects,” Hilton said.

Centrelink declined to comment as the case is before the courts and 50 other cases wait in the wings.

Kristen Caldwell and Centrelink have a prickly relationship.

The young mum pointed out to Centrlelink she and her partner had been overpaid. “They told me I had to spend it, and in six weeks’ time I'd get a letter to say pay it back,” Caldwell said.

Caldwell is actively looking for a job in administration, and from the side of her fridge it's evident she's let's nothing slip by.

It will take her seven years to pay Centrelink back for its mistake - she owes $838.40.

“They don't know what they're doing. Their staff are overworked and struggling,” she said.

Could that be the excuse for Centrelink paying $156 million in youth allowance it shouldn't have?

Or overpaying family tax benefits to the tune of a billion dollars?

And parenting payments of more than $600 million?

Or perhaps the Newstart allowance by more than $420 million?

The disability support pension’s been overpaid by $209 million and others by more than $500 million.

All up $2.8 billion of your tax dollars has been wrongly handed out by the organisation.

The question is will Centrelink try to get all of that back, and at what cost?

According to Peter Borbury of Welfare Rights, the blame game has begun.

“The people that we see, nearly all cases, it’s at best a mistake. They feel really guilty in a lot of cases and also feel quite offended that they've usually received a debt notice out of the blue,” Borbury said.

“They certainly target people who struggle, there isn't any question about that.”

But with jail as the new threat it leaves many welfare recipients nervous.

“I just can't live like this. It don't want to go to jail,” Lara concluded.

Contact details

• Centrelink - www.humanservices.gov.au