- The Guardian
- Issue #2157
Ann Kayis-Kumar, the founding director of UNSW Tax and Business Advisory Clinic, deals with victim-survivors of financial abuse. She has raised concerns that Director Penalty Notices (DPNs) are “unwittingly capturing people, survivors of abuse, and there are not appropriate safeguards in place.” DPNs are a means of collecting debt used by the Australian Taxation Office (ATO). “We think that the reason for the DPN numbers being as high as they are is because they are, in effect, sexually transmitted tax debts,” she says. Kayis-Kumar reports that in the past year the percentage of women seeking financial advice from the Clinic who have experienced family or domestic violence has risen from 65% to over 80%. These debts come from business debts, bankruptcy, corporate directorships and director penalty notices.
“The perpetrators of violence can effectively weaponise the tax system by placing tax debts solely in the names of former partners, often because they have made them directors of companies or through family businesses operating through partnerships or trusts,” Kayis-Kumar says. Women experiencing coercive control may have no control or involvement in financial affairs. They are denied access to financial accounts, are unable to control businesses that might be in their name. Where massive tax debts build up, they have no idea that these debts exist, let alone that they will be deemed to have responsibility. As a result when victim-survivors flee abusive relationships they can suddenly be hit with massive tax and other debts not of their making. Australian tax law is inflexible, requiring victims pay tax on their “share” of a family partnership’s income or the whole of a debt incurred in their name.
Economic abuse is all too common with one in six women and one in 13 men having experienced economic abuse by an intimate partner. It occurs in nearly all domestic and family violence cases. The average tax debt of those approaching the Clinic for assistance is around $90,000. This can result in debilitating financial burdens, exhausted savings, insecure housing, and prolonged economic instability, well after abusive relationships end. In some cases women resort to going back into abusive relationships.
Financial counsellors and the Tax Ombudsman have called for the ATO to take a more compassionate and understanding approach. At present legislation restricts the discretionary powers of the ATO in waiving debt in such instances on compassionate grounds although it lets big business off the hook. The counsellors and the Ombudsman are calling on the government to legislate provisions for the ATO to have the freedom to waive debts in cases of victims of financial abuse. When victims of financial abuse, especially those fleeing domestic and family violence, suddenly become aware they are liable for tax debts it can have serious consequences – mentally and financially.
After a lull during the peak of the COVID pandemic, the ATO is increasingly issuing garnishee notices that give it the authority to take money directly from people’s bank accounts. It is also reporting alleged business debts to credit agencies, which then make it impossible for victim-survivors to access credit.
The Ombudsman has a responsibility to review and make recommendations on systemic issues to improve tax administration and give advice to the government and Parliament. The government should heed its advice and legislate to prevent any more victim-survivors being hit with previously unknown tax debts for which they played no part in accumulating.
“Legislative reform to shift tax liability from abuse survivors to perpetrators is the key to helping solve the problem,” Kayis-Kumar says.
For information and advice about family and intimate partner violence contact 1800 RESPECT (1800 737 732).
