Tax laws trap domestic abuse survivors in debt cycles, expert warns
A UNSW professor has called for reform after 80 per cent of female clients at the campus tax clinic reported abuse.
The tax system is unfit to tackle domestic violence situations, with inflexible laws and punitive charges trapping victims in debt cycles and causing “policy-induced poverty”, an expert has warned.
It comes as statistics from the UNSW Tax Clinic show that over 80 per cent of female clients self-reported domestic violence in the last year – up from 60 per cent in 2022.
During a panel discussion at the Tax Institute’s annual summit last week, Associate Professor Ann Kayis-Kumar said the statistics showed there was a “systemic problem”.
“The tax clinic screens for different markers because individuals are not just a walking tax problem – so we screen for things like mental health problems, domestic violence, whether they’re a carer, disability, cultural and linguistic diversity or First Nations,” she said.
“[Domestic violence] was the marker that just kept coming up at abnormal levels.”
She said clients at the clinic, which offers pro-bono tax advice to those in financial distress, face an average of $80,000 in tax debts.
These debts – to which a general interest charge of 11 per cent is applied – were often accumulated due to actions of abusive partners and dwarfed the incomes of vulnerable clients.
“The tax system doesn't have the appropriate mechanisms to deal with tax-policy induced poverty – debt cycles,” Kayis-Kumar said.
“The debts are enormous, particularly when you look at their income, and they’re on Centrelink, so that’s about $40,000 a year of government support to pay off an $80,000 debt.”
She said “tax justice” should be added to the broader reform conversation as other panellists advocated for a rebalancing of the country’s tax mix, more legislative clarity and certainty and scrapping taxes like the FBT.
Kayis-Kumar called for reforms to modernise the system to better address domestic violence issues, including granting the ATO the authority to relieve victims of tax debts incurred through abuse and laws to redirect tax liabilities to perpetrators.
In an interview with Accountants Daily in February, Kayis-Kumar said a general discretionary power, as seen in other countries like the US, could give the ATO the flexibility needed to relieve debts.
The lack of such a power led the ATO to its controversial on-hold debt recovery campaign, which involved the automated re-raising of debts previously deemed uneconomical to pursue.
The campaign, suspended after community backlash, drew comparisons to the Robodebt scandal and disproportionately impacted financially vulnerable individuals without access to tax advice.
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