New data shows over 120,000 welfare recipients had payments suspended despite having a valid reason.

Channel Seven’s Sunrise program last week ran a “dole bludger” segment citing News Corp reports saying 78 per cent of people on welfare had had their payments suspended.

The data showed that out of 744,884 participants on the Jobactive welfare-to-work scheme last financial year, 581,866 had payments suspended for not meeting obligations.

Employment minister Michaelia Cash cited the stats first published in the Daily Telegraph as evidence that the government’s compliance regime works.

But data obtained by Guardian Australia suggests 460,262 people received a “demerit point” under the new system, leaving another 121,604 people whose income support was suspended before it was found that they had a reasonable excuse.

As of July last year, payments are automatically suspended a welfare recipient’s job agency marks them for not meeting a “mutual obligation”.

The providers are forced to issue a suspension whenever this happens.

The new system has seen a 70 per cent increase in the number of suspensions.

The Australian Council of Social Service (ACOSS) says that shows that “this compliance system is not working”.

“We know that tens of thousands of people have had their payments suspended despite doing their best to meet their obligations,” she said.

“When your payment is suspended, you may not be able to buy groceries that day or pay the rent.

“People on Newstart can’t always afford phone credit or access emails but they get their payments suspended if they miss or are late to job agency appointments, even when they haven’t been notified.”

There are also claims that suspensions have been issued for people who were attending job interviews or training, rather than a meeting with their providers.

The Federal Government says suspensions are not a “penalty”, but in fact are intended to encourage job seekers to engage with the system.

“Anyone who receives a payment suspension and has a legitimate excuse will be back-paid,” a spokesperson for the employment minister told reporters on Thursday.

“This is clear evidence that the system is working.”

But the back-payments are often delayed, creating an additional source of financial distress for some of Australia’s most marginalised.