Louise, a pseudonym for her protection, was blindsided when she received a notice from the Australian Taxation Office (ATO) demanding she pay a $20,000 tax debt within 21 days. The debt, accumulated without her knowledge, was linked to a company she was unknowingly listed as a director of. Despite having no involvement in the company, the notice held her liable for the debt.
“That was the first time I realized the situation I was in, and I was so overwhelmed,” Louise told ABC News. As a single mother of two, she was left grappling with the question, “How am I going to clear my name?” Her former partner, who managed all financial matters during their marriage, had registered her as a director without her consent, subjecting her to financial coercion and emotional abuse.
Financial Coercion: A Widespread Issue
Louise’s story is far from unique. Financial and economic abuse is a significant issue in Australia, costing the economy nearly $11 billion annually and affecting over 2.4 million Australians, according to a Deloitte study commissioned by CBA and published by Treasury.
A new national study, the first of its kind in Australia, highlights the devastating impact of coerced business debt on domestic abuse survivors. Led by Jasmine Opdam of Redfern Legal Centre and Associate Professor Vivien Chen from Monash Business School, the research reveals how perpetrators commit fraud by impersonating their partners, signing them up as company directors, and burdening them with business and tax debts.
“Perpetrators of financial abuse commit fraud by impersonating their partners, signing them up as company directors, and putting business and tax debts in their name,” said Jasmine Opdam.
Government Action and Proposed Reforms
The Australian government is taking steps to address this issue by proposing stricter regulations on company directorships. Assistant Treasury Minister Andrew Leigh announced plans to make it more difficult for directors to be appointed without explicit consent and to ensure penalties for perpetrators who sign individuals as directors without their knowledge.
“It’s a matter of economic justice and social justice,” Dr. Leigh stated. The consultation on these proposed changes will continue until December 24, with legislation potentially being enacted next year. These reforms align with the Labor government’s broader commitment to reducing domestic and family violence.
“The national plan to end violence started in 2022, it covers the decade to 2032, and so this is a small but important piece in that larger plan,” Dr. Leigh said.
Challenges and Calls for Broader Reforms
Despite these efforts, experts like Ms. Opdam caution that the proposed changes might not address all forms of financial abuse. She advocates for penalties against professionals who facilitate such abuse and highlights the need for reforms that encompass fraudulent or coerced ABN registrations, tax returns, and super funds.
Mary, another victim of financial coercion, echoes these sentiments. She was left with $150,000 in debts after her ex-husband manipulated her into becoming a company director. It took her years to resolve these debts, highlighting the need for more robust protections and consequences for abusers.
Additionally, there are calls for Australia to adopt a system similar to the US’s “innocent spouse relief,” which provides tax debt relief for victims of financial abuse. Ann Kayis-Kumar from UNSW’s tax and business advisory clinic suggests that such a system could relieve victims from paying debts incurred by their abusers.
“Instead, the perpetrator, because they are the one responsible for creating the tax debt, would be held financially liable for paying that off,” Ms. Kayis-Kumar said.
Support and Future Directions
The ATO has introduced a “vulnerability framework” to better support those experiencing financial abuse, though current laws do not allow for complete debt waivers. The framework aims to improve how the agency listens, communicates, and connects people to support services.
Louise continues to fight to clear her name, working with legal and tax professionals. She hopes that government agencies will develop a deeper understanding of financial abuse cases and hold perpetrators accountable. “Make the perpetrator accountable,” she said, urging for systemic changes that focus on the root of the problem.
The government’s ongoing consultations and potential legislative changes represent a crucial step toward addressing financial abuse, but experts and victims alike stress the need for comprehensive reforms that protect vulnerable individuals and ensure justice is served.
