Financial abuse

Financial abuse is a serious form of domestic and family violence. It refers to ‘[a] pattern of control, exploitation or sabotage of money, finances and economic resources which affects an individual’s capacity to acquire, use and maintain economic resources, threatening their economic security and self-sufficiency’. (Refer to Understanding Economic and Financial Abuse in Intimate Partner Relationships (PDF, 581KB)This link will download a file Gendered Violence Research Network, UNSW Sydney).

Identifying the intersection of tax and intimate partner financial abuse

Arising from perpetrators’ misuse of business structures to create tax debts in the names of victim-survivors, tax clinic research was finding that ‘sexually transmitted tax debts’ were having severe ramifications, leaving victim-survivors with debilitating financial burdens, reduced assets, insecure housing and prolonged economic instability even after leaving abusive relationships. Victim-survivors frequently identify that they feel the perpetrators of family violence are continuing the financial abuse when the ATO contacts them about debts created by their abusers. Their pain is increased when they discover there are so few options available to the ATO to pursue the perpetrators for those debts and provide relief to the victim-survivors. (Refer to Identifying and supporting financially vulnerable women experiencing economic abuse: a grounded theory approach (PDF, 1.03MB)This link will download a file eJournal of Tax Research (2023) vol. 21, no. 2, pp. 173–202).

Tax clinic research highlighted the need for legislative reform inspired by the United States ‘innocent spouse relief’ provisions which have offered tax relief for victim-survivors of financial abuse since 1998. (Refer to Squeezing blood from stones? A comparative analysis of tax relief for victim-survivors in Australia and the United StatesExternal Link UNSW Business School, 4 March 2024.) This proposal attracted media attention in 2024, including from The Guardian and the ABC’s The Business. This media coverage drew significant interest from the government, policymakers, government agencies (including the Tax Ombudsman) and the tax and accounting professions.

Joint submission to Parliamentary inquiry

The program is proud to have collaborated on a joint submission to the Parliamentary Joint Committee’s inquiry into financial services regulatory framework in relation to financial abuse (PJC’s Financial Abuse Inquiry). This joint submission involved 10 tax clinics who each contributed their frontline insights and client case studies and informed the PJC’s Final Report. Specifically, the joint submission was cited 5 times throughout the Final Report and our reform recommendations were endorsed in relation to the weaponisation of the tax system, misuse of company directorships, and enforcement of director penalty notices. (Refer to National Tax Clinic Program – Submission on Inquiry into the financial services regulatory framework in relation to financial abuse in Australia (PDF, 233KB)This link will download a file 21 June 2024).

Financial elder abuse

Some tax clinics have been supporting older people impacted by financial elder abuse. The PJC’s Financial Abuse Inquiry observed that ‘financial elder abuse or exploitation is the misuse or theft of an older person’s money or assets… Compared to family and domestic violence, perpetrators of financial elder abuse are often family members, mostly adult children, which can make reporting financial elder abuse more difficult for older people.’

A typical scenario encountered by a tax clinic involved an elderly pensioner who agreed to act as a director of a company after a family member misrepresented the financial status of the company. The client received director penalty notices (DPNs) in respect of historical debts of the company. The tax clinic assisted the client in making representations to the ATO seeking to have the DPNs withdrawn.

Client testimonial ‘Thank you so, so much again for your help and assistance in this long journey out of domestic violence and financial abuse. I am so appreciative of your service that you offered and your help and assistance to help me move forward in such a scary and vulnerable time in my life. Without your service… I wouldn't have been able to do this alone and stay safe and have some chance of a financially secure future.’

 

Advocacy by tax clinics

Advocacy is at the heart of the program, and this commitment is particularly evident in our work supporting victims of spousal economic and financial abuse. In these cases, individuals are left with tax debts, inaccurate returns, or no access to their own tax records after a partner has taken control of their financial affairs. Many discover years later that their name was used without consent to operate a business, be appointed as a director of a company, lodge false returns, or claim benefits to which they were not entitled, often resulting in significant ATO debts or compliance action.

Tax clinics play a vital role in helping these clients untangle complex and emotionally distressing financial histories. We advocate directly to the ATO on their behalf, working to correct records, seek remission of unfair debts or penalties, and help clients regain access to their tax file number and superannuation accounts. These are rarely straightforward cases, and proving a client’s lack of knowledge or involvement in past financial dealings requires persistence, compassion, and strong supporting evidence. Despite the difficulty, our clinics remain committed to ensuring that victims of financial abuse are not further punished by the system and can take meaningful steps toward financial recovery and independence.

Case study: financial abuse Carol (not her real name) was referred to the University of NSW tax clinic by Financial Abuse Service NSW. A mother of 3 from regional NSW, Carol had escaped an abusive relationship. Carol came to the clinic in tears having received a director penalty notice (DPN) for over $175,000 in tax debt, which she needed to pay within 21days or face bankruptcy. The clinic in collaboration with our probono partners assisted Carol to successfully defend the DPN. Given the circumstances, the ATO agreed to revoke the DPN. If this had not been successful, she would have declared bankruptcy for this debt that she was not responsible for creating. In Carol's words ‘The clinic lifted the immense burden I was carrying. I was on the brink of bankruptcy. Thanks to them, that stress completely vanished. I felt trapped with no other options, but they made everything so easy and stress-free. The tax agent was exceptional, truly amazing. I can't thank them enough for their outstanding support.’

Student feedback ‘When I first enrolled in this course… I didn’t anticipate just how profound the experience would be. At the beginning, I was sceptical about the mental health, domestic violence and financial abuse training, as I didn’t immediately see the connection to tax issues. However, my perspective changed completely after meeting my first client, a highly educated individual facing severe financial hardship due to domestic violence and financial abuse. That moment was a wake-up call, making me realise that tax problems are often just one piece of a much more complex struggle. I understood the true purpose of our training and the importance of our role in not just solving tax issues, but also supporting people in incredibly difficult life situations.’