Owning a waterfront restaurant was Remoon Israfel's dream.

For the past six years, the former accountant and his partner, Sarah French, have been living that dream: running a seafood restaurant at Batemans Bay on the NSW South Coast. 

But the couple fear they could lose it all after being told a Bushfire Recovery Grant they received had been overpaid by more than $20,000.

When the Clyde Mountain bushfire cut power and services in Batemans Bay on New Year's Eve 2019, they and their children evacuated the South Coast.

Their restaurant, Stingrays Ocean and Grill, suffered serious smoke damage and they lost tens-of-thousands of dollars worth of stock.

"There was no electricity in the town for two weeks and we lost everything," Mr Israfel said.

"We started from zero — wasted six years of hard work in our lives."

The couple applied for a $50,000 Bushfire Recovery Grant from Service NSW, which they received in March last year.

"Given the massive loss of stock, to even open our doors we needed any sort of money to restock without digging into our personal finances," Ms French said.

A few weeks ago, they received a letter from Service NSW stating that they had been overpaid $20,283 due to a "systems error" and they had just 14 days to pay it back.

"There was no way [Remoon] or I could find that kind of money to pay the debt," Ms French said.

Couple left in 'unfair position' 

They pair have since been told they do not need to repay the money within the two weeks stated in the letter, but they fear that even if they sold their business, they still would not be able to afford to repay the debt.

The tourism and hospitality sector in the region has been hard hit by the slump in visitors — first following the fires and then due to COVID-19 travel restrictions and lockdowns.

Due to a lack of customers, the couple has gone without pay for the past three weeks in order to be able to continue paying their staff.

The couple accept that overpayments can occur — and they want to pay back the debt — but Mr Israfel said the position they had been put in was "unfair".

"If you make a mistake, a system error, don't attack a small business that wants to survive — go fix your system," he said. 

More businesses likely impacted 

Federal Labor MP Fiona Phillips said the stressful situation could have been avoided had Service NSW taken a more compassionate approach.

"With a $20,000 bill and having to pay it in just 14 days — it's just not good enough," Ms Phillips said.

"There's a way to do things and clearly that is not the way to do things.

"They've had people sleeping on their floors, they've been giving away food to help people survive. The government needs to have a heart and they need to look after our businesses here and our workers."

Ms Phillips said it was likely Mr Israfel and Ms French were not the only ones who were informed they had just two weeks to repay overpayment amounts of thousands-of-dollars.

The ABC is aware of another grant recipient who received a letter informing them they had only 14 days to repay an overpayment of $15,000.

Service NSW did not respond to questions from the ABC about just how many overpayments had been made, their total value, or explain whether the "systems error" was caused by an IT issue or by human error.

In a statement, a spokesperson said Service NSW "apologises for any inconvenience this has caused during the already stressful recovery period".

"Customers have been supported with advice and guidance from Service NSW on repayment of overpaid funds and given an option to enter a payment plan for the debt," the spokesperson said.