An ombudsman's report into Services Australia and the Department of Social Services found the agencies were "knowingly non-compliant" with child support legislation.
Commonwealth Ombudsman Iain Anderson said the scenario was similar to the Robodebt scandal, because it also involved a government department ignoring the law - albeit for a different reason.
The saga stems to a flaw in the way complex legislation governing parent separations was originally written.
Under the department's policy, a person who looks after their children less than 35 per cent of the time is not owed child support from the other parent.
But that doesn't match up with current laws, which could create a situation where a parent who doesn't care for their children at all could still be owed child support from their former partner.
The department argues the scenario is "unfair and nonsensical", and has chosen to ignore that part of the legislation to ensure parents are treated fairly.
But Mr Anderson said officials had sat on their hands, rather than fixing the problem.
"They've done nothing about it for the last six years, so they decided they wouldn't apply the law in these circumstances," he told AAP.
"It's just not acceptable for agencies to pick and choose what parts of the legislation they're going to comply with."
Mr Anderson said the agency should've raised the issue straight away, and either asked the government to change the law, or gotten advice that it needed to enforce the law as written, even if it didn't agree with how it worked.
The full version of the report has been kept secret as it contains material subject to legal privilege.
A modified version has been released instead.
Mr Anderson said there were some parallels to the Robodebt scandal, which saw hundreds of millions of welfare recipients pursued for debts they didn't owe.
"At the top it's the same issue, which is, public servants should not choose which parts of the law they're going to comply with," he said.
It's not clear how many families are being impacted by the legal loophole, but Mr Anderson said he'd been told it could be more than 16,000 people, with debts running up to $10,000.
In November, after being provided with a draft copy of Mr Anderson's report, the department said it would change the legislation to close the "35 per cent" loophole.
The overhaul would be retrospective so parents weren't unfairly disadvantaged, the department said.
18°C