Laura vividly remembers the day she resolved to leave an abusive relationship. It was January 2020, during a holiday with her former partner, when he became physically violent in front of their children. “He hit me that day,” Laura recalls. Her identity has been concealed for safety reasons.
After confronting him, he pushed her into a wall, grabbed her throat, and threatened her life. This incident marked the breaking point in a relationship marred by years of abuse and control. Laura’s ex-partner, with a criminal record, was running a business under her name, accruing significant tax debts unbeknownst to her.
Laura’s story is one among many as the Australian Taxation Office (ATO) intensifies efforts to recover nearly $56 billion in tax debt from individuals and small businesses. The ATO’s approach, however, has drawn criticism for its impact on victims of financial abuse, like Laura, who find themselves liable for debts they did not incur.
Financial Abuse and Tax Liability
Laura’s ordeal with the ATO began when she took over the business in late 2021, unaware of the debts or that she would become personally liable for half a million dollars. Her situation is not unique; many Australians face similar financial hardships as the ATO seeks to reclaim billions in unpaid taxes.
Experts and financial counsellors urge the ATO to adopt a more compassionate approach, advocating for legislative changes to allow debt waivers in cases of financial abuse. They warn that holding victims accountable for such debts can exacerbate their mental and financial distress.
“Victims of financial abuse can be pushed over the edge, both mentally and financially,” warn financial counsellors.
Director Penalty Notices and Increased Debt Recovery
The ATO’s use of Director Penalty Notices (DPNs) has surged, making individuals personally liable for company tax debts. This measure, while effective in debt collection, often ensnares survivors of financial abuse without adequate safeguards.
Ann Kayis-Kumar, director of UNSW Tax and Business Advisory Clinic, highlights the issue: “These DPNs are unwittingly capturing survivors of abuse, lacking appropriate safeguards.”
The ATO’s data reveals a significant increase in DPNs and garnishee notices, allowing the agency to directly withdraw funds from bank accounts. This aggressive recovery strategy has been criticized for disproportionately affecting women tied to their ex-partners’ debts.
By the Numbers: ATO Debt Recovery
- 2018-19: 13,120 DPNs issued
- 2023-24: 26,702 DPNs issued
- 2024-25 (to June 30): 64,342 DPNs issued
Challenges in Recognizing Financial Abuse
Financial abuse often goes unreported due to coercive control, making it difficult for victims to come forward. Julie Dal Pra, a financial counsellor, emphasizes the need for cultural change within the ATO to stop treating victims as tax avoiders.
Dal Pra notes an increase in cases where women are made directors without consent, becoming liable for tax debts. “There’s a lack of understanding of financial abuse, and victims aren’t being heard or believed,” she says.
Laura’s experience underscores this challenge. In 2017, coerced by her ex-partner, she negotiated a payment arrangement with the ATO, unaware of the growing debt. In 2022, her request to waive the debt was rejected, with the ATO citing her involvement in the business operations.
“A prudent director would have taken steps to address the company’s financial difficulties,” the ATO’s letter stated.
Calls for Legislative and Institutional Reform
Advocates call for legislative reform to provide relief for victims of financial abuse. In the U.S., the IRS offers “innocent spouse relief,” protecting victims from joint tax liabilities. Experts suggest Australia could learn from such international models.
Ruth Owen, Tax Ombudsman, stresses the need for specialized ATO staff to identify and support victims of financial abuse. “The ATO must recognize that some tax debts are not the responsibility of the individuals they’re pursuing,” she argues.
The ATO is currently consulting on a new Vulnerability Framework to offer tailored support to vulnerable taxpayers, including potential victims of financial abuse. However, it remains uncertain how this will be implemented.
Looking Forward: A Call for Compassion
Laura’s case is under review by the ATO, with hopes that her debt will be removed. Meanwhile, she continues to advocate for a more understanding and supportive approach from the tax authorities.
“It’s not easy to come forward and share experiences of abuse,” Laura says, urging the ATO to listen and provide the necessary tools to prevent similar situations. Her story highlights the urgent need for systemic change to protect and support victims of financial abuse.
For those in similar situations, support services are available:
- 1800 Respect National Helpline: 1800 737 732
- Women’s Crisis Line: 1800 811 811
- Men’s Referral Service: 1300 766 491
- Lifeline: 131 114
