The tax system is being used as a weapon by family violence perpetrators, with our rigid tax system an unwitting ally that inflicts more damage on people trying to flee dangerous situations.

Ann Kayis-Kumar, the founding director of UNSW’s tax and business advisory clinic, is frustrated.

Inside the clinic, women have help from experienced tax advisers to unravel their situations. Many discover they have been appointed as directors to now-failed companies or have been loaded up with enormous debts sometimes totalling hundreds of thousands of dollars.

“The way that the system is structured, perpetrators can weaponise the system so the victim-survivor is saddled with debts that the perpetrator created,” she said.

The Australian Tax Office (ATO) is mandated to pursue debts. 

The clinic said the agency had been reluctant to fix what was a clear problem.

In the US and other nations, tax agencies have changed policies to achieve a radical reversal; moving the debts back to the perpetrator.

Experts want to see that in Australia too.

‘Disturbing’ amounts of debt

In the clinic, a free service operating out of the University of New South Wales, victim-survivors of family violence learn difficult truths about their debts.

“[They are] very large [sums] in lots of cases, and very disturbing,” Tony Martins, principal tax clinic supervisor said.

The nature of coercive control, a combination of behaviours that restrict the lives and choices of people in abusive relationships, means some victim-survivors are unaware their personal details have been used to make them responsible for debts or appointed as company directors.  

“It’s a very stressful situation they find themselves in,” Mr Martins said.

In a statement, a spokesperson for the ATO said it acknowledged that some people incurred debts because of situations involving abuse.

Referring specifically to people appointed under duress as directors of companies, the statement said:

“There are actions the ATO can take to support taxpayers who are impacted by domestic violence as they work through their situation. This can include pausing recovery action to give the taxpayer time to seek advice and support. 

“In certain circumstances, directors may have a valid defence that would remove their director penalty debt. These are generally available for people who, for good reason, did not ever take any part in managing the company.  

“Remission of the director penalty debt may also be available in other very limited circumstances.”

Samantha’s story

Mr Martins gives the example of a woman we will call Samantha.

She and her children are in temporary housing after suffering physical and financial abuse from her ex-partner. 

To meet daily expenses she is receiving meagre Centrelink benefits. 

At the clinic, Samantha discovered that an Australian Business Number (ABN) in her name was used more than a decade ago to start a business that now has a tax debt of $155,000. 

“She did not receive any financial benefit from this business,” Mr Martins said.

“She was not involved in running the business, however, the debt is in her name.” 

“To top that off, she also has a Centrelink debt because the income from that business that she never received has, of course, affected her Centrelink benefits that she receives.”

Mr Martins and Samantha have had success with some agencies and institutions around the compromised and exploited nature of her identification documents and ABN. 

But the ATO has not been receptive. 

It is still chasing the $155,000 debt despite her living below the poverty line.

“We’re in discussions in order to try and have these debts in her name, that she didn’t incur … taken off her name,” Mr Martins said.

Life derailed by debt

During the COVID-19 pandemic, the tax office did not pursue debts. 

But as restrictions ended and the economy took off, the ATO said it was owed more than $15 billion from 1.8 million entities and it set about chasing them up.