Government Services Minister Stuart Robert said the decision would enable Australians to “focus on their personal situation”.
“Pausing certain debt activity also enables the redeployment of staff to assist in areas of critical need, like claims processing for those Australians impacted by the pandemic,” Robert said.
Centrelink has been overwhelmed with new applications from people needing income support after finding themselves out of work because of measures to slow coronavirus.
Another recent decision to help the agency cope with demand is a pause on transferring recipients to the cashless welfare card.
Centrelink plans to hire an extra 5000 staff to deal with the influx in applications.
Robert said the agency would still work to stamp out fraud and serious non-compliance.
The Federal Court last year found the robodebt scheme was unlawful, prompting the government to water it down.
The automated system matches tax office and Centrelink data to claw back overpaid welfare payments.
The system is also facing a class action lawsuit.
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