Tax a key factor in financial abuse

This article was current at the time of publication.

Financial abuse is often a tactic used by perpetrators of family violence to control, manipulate and isolate their victims. It occurs when one partner restricts or controls the other’s access to financial resources, often with the goal of maintaining power and control over them.

In Australia, one in six women and one in 13 men are victims of financial abuse from a partner. For Julie Dal Pra, small business financial counsellor at community health service Each, financial abuse is often hidden in plain sight. 

“Shockingly, in our work with survivors of financial abuse, we find that accountants are unknowingly involved in about 80 per cent of the cases,” she says.

“A common occurrence is tax returns being completed without someone's knowledge or consent. This happens frequently, especially when someone has never even met the accountant in question,” says Dal Pra.

Gaps in the law

Addressing it is a challenge, says Dal Pra, because family violence is not explicitly recognised in legislation in Australia. 

“It’s not addressed in the Income Tax Act or the Corporations Act, and there’s also the complexity of the Insolvency Act,” she says.

“So, the issue becomes how to navigate the interaction between different laws and understand the professional responsibilities involved — balancing what’s within legal boundaries and scope of practice, while also considering the ethical and moral duties professionals have,” Dal Pra says.

Review of the tax system

The Inspector-General of Taxation and the Taxation Ombudsman, Ruth Owen, is aware of these challenges, which are the focus of her first review since being appointed in July 2024. 

The review findings, released in April, examined the Australian Taxation Office’s (ATO) current systems, policies, and processes for identifying and managing financial abuse and coercive control within the tax and superannuation systems. 

The resulting report reveals how the tax system is being used as a weapon of financial abuse. It details “how the ATO, among other organisations, can respond through prevention, detection and support for the victim-survivors”.

Recommendations to the ATO include:

• Increased training for all frontline officers. Provision of dedicated and specialist team with the appropriate skills and training in financial abuse to support victim-survivors.
• Explore available opportunities to remove the debt from the victim-survivor.
• Clarify how and when the ATO can report potential financial abuse to law enforcement authorities.

“I believe the issue of financial abuse is gaining significant momentum and attention,” says Owen. 

“We have received valuable input from academics and community organisations that support victim-survivors of domestic violence, and the tax sector itself is beginning to recognise this as a serious problem that needs to be addressed.”

The ATO notes it is aware of the growing number of taxpayers presenting with a range of vulnerable circumstances and the impacts of financial abuse and coercion are of considerable concern.

“We are committed to ensuring we do our part to enhance the way the system can operate to both prevent and improve the response to these impacts,” says an ATO spokesperson.

Warning signs for practitioners

Recognising the warning signs of financial abuse is crucial, advises Owens.

“Accountants and finance professionals should be vigilant for patterns such as one partner consistently handling all financial matters, one person being excluded from financial discussions, or irregularities in signatures or meeting attendance,” says Owens.

“But it’s important to be mindful that sharing certain information might lead to an escalation of abuse. For tax agents working with families or husband-and-wife partnerships, it’s crucial to notice red flags, such as if only one spouse is signing documents or attending meetings when both should be present. 

“As part of your professional and ethical duties, you should ensure that both spouses are seen individually and fully understand their roles, responsibilities and liabilities, especially if they’re involved in a company or trust,” says Owens.

Michael Parker, a lawyer who has been involved in pro bono financial abuse cases, underscores that practitioners must be conscious of where their instructions are coming from. “For instance, it is best practice to seek instructions directly from the individual concerned, not indirectly via their partner”.

He also recommends when documents are sent out to a client for electronic signing, the individual should be called to confirm that they have seen and approved the document. “[As] their partner could be accessing the computer/device and authorising documents without their knowledge or consent.”

Checklist

• Look for irregular payments or transfers. 
• Watch for lack of transparency. 
• Watch for blurring of personal and business funds. 
• Look for financial control or isolation from financial information during family breakdowns, such as a divorce.
• Appointing directors/partners: Check for sudden, unexplained leadership changes that may indicate financial manipulation.
• Business partner disagreements: Look for financial mismanagement or misappropriation of funds in cases of business conflict.
• Formalise processes for financial transactions, payroll and business decisions.
• Conduct regular audits and financial reviews to uncover irregularities.
• Provide training and awareness for staff on recognising financial abuse.

If you or someone you know is experiencing financial abuse, support and resources are available at 1800RESPECT. Take care and prioritise your well-being.