The Silent Struggle: How the Australian Tax System Fails Victims of Domestic Financial Abuse

Content Warning: This article discusses sensitive topics related to domestic abuse and financial coercion.

Domestic Abuse takes many forms, and financial abuse is one of the most insidious and at one stage was the least discussed. While this occurs all over the Globe in Australia, a disturbing trend has emerged where partners and ex-partners exploit the tax system to further control and manipulate their victims. By fraudulently applying for Australian Business Numbers (ABNs) under their partner's name, often with the help of complicit tax professionals, abusers can wreak havoc on their victim's financial standing and future.

This is without taking into consideration that while they are working and have sole control of the bank accounts, they can declare they are not earning and can't work to avoid child support or spousal supports!

The Impossible Burden of Proof: When victims of this type of abuse reach out to the Australian Taxation Office (ATO) for help, they are often met with a system that seems to place the burden of proof squarely on their shoulders. Women report being asked questions like "Were you in a relationship?" as if the mere fact of a past partnership is enough to imply consent or complicity in the fraud. This line of questioning not only retraumatises victims but reveals a fundamental misunderstanding of the dynamics of coercive control.

Do not be fooled that this only occurs in DV situations!

The case study below has been resolved after many challenges and it did not have signs of DV; in fact it was a perfect picture. Names have been redacted for privacy reasons.        

Amelia, a stay-at-home mother, trusted her husband John to handle their family business finances. When John fell ill, Amelia discovered the business was drowning in debt, largely owed to the Australian Taxation Office (ATO). Seeking advice from John's long-time associate, an accountant who introduced an insolvency practitioner, Amelia was advised to become the office holder to protect John as the primary income earner.

Unbeknownst to Amelia, this arrangement made her liable for the company's tax debts. The practitioner failed to fully disclose the consequences of this decision. As the administration unfolded, Amelia uncovered years of financial mismanagement, unethical practices, and potentially illegal tactics used by John, including withholding employee superannuation and falsifying records.

Amelia felt betrayed by both John and the insolvency practitioner. To worsen matters, the ATO agreed to the administration, allowing John to walk away from the debts while Amelia bore the liability. The accountant, who had been working with John for years, had also played a role in enabling the misconduct. Whether through negligence or intentional omission, the accountant failed to report the irregularities and provide transparent advice to both partners.

This case highlights the need for greater education and support for women navigating business finance and insolvency. It underscores the importance of holding professionals, including insolvency practitioners and accountants, responsible for providing clear, impartial, and ethical advice that prioritizes the well-being of all parties. By advocating for systemic change, we can create a more equitable environment, ensuring women like Amelia are not left to bear the burden of their partner's financial misconduct alone.

This coercion does not discriminate and can only be named as abuse and violation. Women are naturally nurturers and love can become the barrier that blurs vision and removes all ability to think rationally. Therefore making the person reliant on what they are told. Sadly the aftermath can be devasting, destroying the love of self and others, your identity and the financial ability to rebuild. The emotional turmoil is incomprehensible, making it difficult to see a way out!

Anecdotes from survivors paint a picture of an uncaring bureaucracy that is quick to make judgments and slow to offer real solutions. Firstly the fear and intimidation in calling the ATO and then having to answer questions without understanding that the person on the other end has a procedure and scripted system they have to follow. Having been a Support Person to many; one woman recounted calling the ATO to report the fraudulent ABN only to be told, after an awkward pause, that she was responsible for preventing her ex-partner from having access to her private details. The unspoken assumption was that she had been a willing participant in the fraud.

Blacklisted for Speaking Out: The fear of being blacklisted or penalised for reporting abuse is a common theme among victims. Many women report feeling pressured to enter into payment arrangements with the ATO while investigations are pending, only to be told later that the arrangement itself is proof of their responsibility for the debt. The power imbalance between the victim and the tax authority is stark, and the potential for re-victimisation is high.

A System Stacked Against Survivors:

At the heart of this issue is a tax system that is ill-equipped to deal with the complexities of domestic violence and financial abuse. Front-line ATO staff may lack the training and sensitivity to handle these cases appropriately, and the burden of proof often falls disproportionately on the victim. Privacy concerns and the need to maintain confidentiality can also work against victims, making it difficult to provide the kind of documentation that the ATO requires to substantiate claims of abuse.

There are no internal processes that assist the woman in situations where her partner withheld access to the ATO or other regulators in fear of being found out.

The Way Forward: Addressing this problem will require a multi-faceted approach that includes increased training for ATO staff, stronger penalties for tax professionals who facilitate fraud, and a fundamental shift in how we think about domestic violence and financial abuse. We need a system that starts from a place of belief and support for victims, rather than one that places the onus on them to prove their victimisation.

Conclusion: The stories of women who have suffered financial abuse through the tax system are heart-breaking and all too common. It is time for Australia to confront this silent epidemic and take meaningful steps to support survivors. By working together to create a more just and compassionate tax system, we can send a clear message that domestic violence in all its forms will not be tolerated.

The IGTO's media release about their 'own initiative investigation' into tax identity fraud in Australia is a crucial step towards addressing a long-standing issue that has impacted countless victims, particularly women who have suffered financial abuse at the hands of their partners or ex-partners. While the investigation seeks to shed light on the problems within the ATO's systems and processes, it is concerning that many victims who are unaware of this inquiry may not have the opportunity to make submissions.

So what is this all about?

In summary, the Inspector-General of Taxation and Taxation Ombudsman (IGTO) announced an 'own initiative investigation' into tax identity fraud in Australia. The key points are:

1. The IGTO is concerned about increasing instances of tax identity and financial fraud reported in the media and confirmed through discussions with complainants and tax practitioners.
2. Since 1 July 2022, the IGTO has received over 130 complaint cases about the ATO's actions relating to compromised tax accounts and identity fraud.
3. The investigation aims to understand what the community is experiencing in terms of identity and financial fraud through the tax system. Examples include unauthorized refunds, suspicious activity on client accounts, and phishing attempts.
4. The IGTO is seeking input from taxpayers and tax practitioners who have experienced or witnessed such fraud. An ID Fraud response template is provided for submissions.
5. The investigation will look into the ATO's fraud prevention, detection and response systems, communication measures, use of information from taxpayers indicating potential weaknesses, effectiveness in treating notified fraud instances, and consideration of impacts on affected taxpayers.
6. A report with findings and recommendations is planned for release in June 2024. The submission deadline is 15 February 2024.
7. The media release provides advice for taxpayers who suspect they are victims of tax identity fraud, including contacting the ATO's Client Identity Support Centre and lodging complaints with the ATO and IGTO.

Moreover, there are those who have made submissions to this and other inquiries in the past, providing evidence of the systemic issues, the cohort of people and professionals involved, and the arduous process of seeking justice. Unfortunately, their voices have often gone unheard, and their experiences unacknowledged.

It is disheartening to think of the countless victims who have been betrayed not only by their partners but also by the tax professionals who facilitated the fraud and the very system that should have protected them. The emotional and financial toll of navigating the complex web of bureaucracy and legal proceedings cannot be overstated.

As the IGTO's investigation progresses, it is crucial that the findings and recommendations not only address the immediate problems within the ATO's fraud detection and response mechanisms but also provide practical strategies for preventing future abuse and supporting victims through the process of discovery and resolution.

This support must extend beyond mere lip service and token gestures. It requires a fundamental shift in how we approach domestic financial abuse, recognizing it as a serious crime that demands swift and decisive action. Victims should not have to bear the burden of proof or face scepticism and blame when reporting fraudulent activities.

Furthermore, the investigation should aim to hold accountable not just the perpetrators of the fraud but also the tax professionals who enabled it. Stronger penalties and stricter regulations for those who breach their ethical and professional duties could serve as a powerful deterrent and help restore trust in the system.

Ultimately, the success of the IGTO's investigation will be measured not only by the strength of its recommendations but by the tangible changes it inspires in the lives of victims. By amplifying the voices of those who have suffered in silence and working towards a more just and supportive tax system, we can begin to break the cycle of abuse and empower survivors to reclaim their financial freedom and autonomy.

The problem is that no one is listening due to potential exposure and liability concerns. No one will draw a line in the sand and this is where we can stifle and real changes.

?So what are the behaviours you need to understand?

The common behaviours exhibited by perpetrators of tax-related identity fraud and financial abuse in the context of intimate partner relationships may include:

1. Coercion and control: Pressuring or manipulating their partner into sharing their TFN, myGov login details, or other sensitive financial information. Forcing their partner to sign documents, such as tax returns or ABN applications, without allowing them to read or understand the contents. Threatening or intimidating their partner to comply with their demands, often using physical violence, emotional abuse, or threats of harm to children or other family members.
2. Isolation and secrecy: Limiting their partner's access to financial information, such as bank statements, tax documents, or online accounts. Insisting on managing all financial matters alone, without involving or informing their partner. Discouraging or preventing their partner from seeking advice or support from family, friends, or professionals regarding their financial situation.
3. Exploitation and fraud: Using their partner's personal information to register for an ABN, open bank accounts, or apply for loans or credit cards without their knowledge or consent. Falsifying information on tax returns or business activity statements to obtain refunds, credits, or other financial benefits in their partner's name. Pocketing any refunds or benefits obtained through fraudulent means and leaving their partner to bear the consequences of any debts or liabilities incurred.
4. Gaslighting and blame-shifting: Denying any wrongdoing or involvement in fraudulent activities when confronted by their partner. Attempting to convince their partner that they are misremembering events or that they consented to the fraudulent actions. Blaming their partner for any financial problems or legal consequences arising from the fraud, suggesting that it was their fault for not being more vigilant or involved in financial matters.
5. Manipulation of professionals: Enlisting the help of unethical or complicit tax professionals to facilitate the fraud and provide a veneer of legitimacy to their actions. Convincing tax professionals that their partner is mentally unstable, financially irresponsible, or untrustworthy, to discourage them from communicating directly with the victim. Exploiting their partner's lack of financial literacy or language barriers to mislead professionals and conceal the extent of the fraud.
6. Retaliation and escalation: Increasing the frequency or severity of abuse when their partner attempts to assert control over their own finances or seek help from authorities. Threatening to report their partner to the ATO or other government agencies for alleged tax fraud or non-compliance if they try to leave the relationship or expose the perpetrator's actions. Engaging in prolonged legal battles or vexatious litigation to exhaust their partner's financial resources and maintain control over their lives.

It is important to note that these behaviours often occur within a broader context of domestic violence and coercive control, and that victims may face significant barriers to seeking help or escaping the abusive relationship. Perpetrators may exploit their partner's vulnerabilities, such as limited English proficiency, uncertain immigration status, or caring responsibilities, to maintain their control and prevent them from accessing support services or knowledge. Becoming verbally abusive or emotionally manipulating to avoid being found out!.

The issue we face as victims is that no one comprehends the situation and reverts to their own judgements and biases.

Women were never taught the skills to deal with Taxes, Finance and their Rights. The greatest lifeguard needs the skills and equipment to protect and prevent turmoil. Women need Lipstick Strategies, because we have been kept isolated and too difficult to deal with. Diva Academy provides a variety f workshops and webinars to educate women about the four elements of LIFE to instil confidence and strength to regain economic autonomy and prevent coercion, both intimate or professional because our systems play a role in the "Shadow Side of Economic Coercion." Until the systems improve and we can't eliminate internal maladministration you can however arm yourself with the knowledge and templates to deal with these situations. Change begins with education on matters that were kept silent for generations.