The Federal Government will spend $1 billion to replace the Department of Human Services' (DHS) decades old IT system.

The DHS system deals with over $100 billion in Centrelink payments to 7.3 million people annually; approximately $290 million per day or $12 million every hour.

It performs around 50 million daily transactions, processing 500 to 1,000 transactions per second.

In 1983, the Department of Social Security started using a Model 204 (M204) database – the main database component of the department’s current system.

It was chosen at the time because it was the only product on the market that could meet DHS’ performance and capacity requirements.

Today, the system is not just M204 but a composite of over 350 additional components that have been added since the system was originally built to either meet the demands of government policy or fill gaps in the ageing system.

While it still meets most functional requirements - layers of business rules, processes and policy changes built up over the past three decades have made it extremely complex, inflexible and costly to maintain.

Even simple changes can be time-consuming, expensive and can have unforseen impacts on other parts of the system.

The highly complicated nature of the old technology also requires costly ongoing support from a declining number of specialised staff familiar with the technology.

The Government says its new system – due for completion in 2022 - will be focused on the customer, take full advantage of real-time data monitoring and analysis to deliver significant benefits to government, taxpayers and welfare recipients.

The department's approach to this project has been developed following extensive consultation with international governments, private sector organisations, and major ICT enterprises - including the UK Government, Rio Tinto and the Commonwealth Bank.

The project will be carried out via multiple work packages, planning for which will begin on 1 July 2015 with the first stage to be completed by the end of 2016.

The Government says it will partner with the private sector for the design and delivery of the project, and more announcements along these lines are coming soon.