Labor’s crackdown on financial abuse and tax debts welcomed

Senator Katy Gallagher announced new commitments by Labor this week to help end financial abuse within the tax system, where perpetrators rack up tax or social security debts in their partner’s name.

“We have zero tolerance for perpetrators who exploit financial systems to harm their victims,” Gallagher said in a public statement.

“We want to close the loopholes that allow this to happen, and we will change the rules so that perpetrators pay back these debts.”

Labor’s announcement follows the recent release of a review into financial abuse in the tax system by the Inspector-General of Taxation and Taxation Ombudsman (IGTO).

The IGTO’s review found that perpetrators were weaponising the tax system for financial abuse, leading to devastating outcomes for victim-survivors.

The review found that more could be done within the existing legislation to provide support for victim-survivors.

Under the existing law, the ATO can only clear a tax debt or transfer it to the perpetrator in a very limited set of circumstances.

CPA Australia said to address this, legislative changes would be necessary to broaden these circumstances.

“However, the design of these legislative changes must be carefully considered to avoid unnecessary complexity and unintended consequences,” the accounting body said.

“In response to the IGTO recommendations, the ATO has agreed to review its existing powers that may be used to redistribute tax liabilities to perpetrators. The findings of this review, once publicly released, will guide how best improvements to the law can be made.”

The accounting body said legislative changes alone would not resolve this complex issue.

“A comprehensive approach, including education, awareness and support of victim-survivors and professional advisers, is essential to reduce the instances of financial abuse,” it said.

CA ANZ said the proposal to close loopholes in relation to debts incurred through no fault of the victim-survivor was an important step towards ending such exploitation.

“We know the devastating impact of financial abuse through the tax and corporate systems. We have members who work at dedicated clinics that support victim-survivors to navigate a path ahead,” Karen McWilliams, sustainability and business reform leader for CA ANZ, said.

“We recognise that accountants are uniquely poised to recognise people experiencing intimate partner financial abuse and we look forward to further details on how this plan will be enacted in practice, if Labor wins the upcoming election.”

The professional body also welcomed Labor’s other commitment to prevent perpetrators of domestic and family violence from receiving their victims’ superannuation after death.

Superannuation industry bodies such as ASFA and the Super Members Council said two important changes would need to be made to prevent superannuation money from going to abusers.

The bodies have called for the forfeiture rule to prevent perpetrators from inheriting money from their victims, which would require legislative amendment to the Superannuation Industry (Supervision) Act 1993.

The government should also increase the investigative powers and evidence standards of superannuation funds, so they are able to withhold death benefit payments in substantiated cases of family violence until the legal matter has been resolved.

“For too long, perpetrators of family violence have been able to profit from their victims’ death, accessing their super after they died,” Mary Delahunty, chief executive of ASFA, said.

“This insidious legal loophole is wrong, and we welcome the government’s announcement they will start working to close it.”