A new report by the Inspector-General of Taxation and the Taxation Ombudsman (IGTO) has highlighted how the tax system is being used as a weapon of financial abuse. The report identifies how the ATO, among other organisations, can respond through prevention, detection and support for the victim-survivors.

Australian Bureau of Statistics data suggests that 1 in 6 women and 1 in 13 men have experienced economic abuse by an intimate partner. Perpetrators use coercive control or fraud to access superannuation early, pay family trust distributions to other bank accounts, appoint company directors without consent, and falsify tax returns; all to land their victims with significant tax bills.
“It’s shocking that the tax system is being used as a weapon to inflict financial and emotional damage on unsuspecting and vulnerable individuals,” says Ruth Owen, the Inspector-General of Taxation and the Taxation Ombudsman. “The stories we heard during our review were very disturbing, particularly because so many victims only find out about the abuse when they receive a bill from the ATO. By then, it is usually too late.

“The ATO can only clear a tax debt or transfer it to the perpetrator in a very limited set of circumstances. There are a range of options available to support the victim-survivor to pay back the debt over time, through payment plans or deferred recovery actions, but too often those are not clearly explained to them when they contact the ATO. At the end of the day, it still means that the victim-survivors are stuck with the debts inflicted on them even though they weren’t responsible for them.

“More can be done within existing legislation to provide support and relief for victim-survivors,” says Ms Owen.

Although out of scope of the review, the report does commend recommendations to Government from the recent Joint Parliamentary Committee on Corporations and Financial Services which would require future legislation.

The report recommends that the ATO:

• increase its training for all frontline officers and provide dedicated and specialist resources with the appropriate skills and training in financial abuse and trauma-informed practices to better support victim-survivors
• better prevent and detect abuse when it comes to light, including using evidence from trusted partner organisations (meaning victim-survivors are not required to repeat their history for each agency)
• explore available opportunities to remove the debt from the victim-survivor
• clarify how and when it can report potential financial abuse to law enforcement authorities.

The report welcomes the ATO’s work on a ‘Vulnerability Capability’, defining how best the organisation can support taxpayers experiencing all forms of vulnerability, including financial abuse and coercive control.

The report also recognises the ATO’s unique role in combatting financial abuse more broadly, particularly in areas like child support and welfare benefits, which rely on prompt and accurate tax returns.

“Services Australia refers more than 150,000 outstanding tax return cases to the ATO for enforcement each year. If the ATO could work more closely with Services Australia to improve the frequency and quality of the information referred, and improve its data matching, it might lead to better enforcement, which would increase the flow of child support payments, and eventually reduce the opportunity for financial abuse in the system,” Ms Owen says.

Find out more about the report, including how to download a copy, on the review page of this website.

ENDS

Media contact

Paul Wild | Communications
m: 0455 032964
e: paul.wild@igt.gov.au