Accountants can unwittingly help perpetrators of financial abuse, study finds

“Accounts from victim survivors suggest that these professionals took instructions primarily from the perpetrator who made financial decisions, and encouraged victim survivors to agree to arrangements that they did not understand and that were not in their best interests,” the study read.

“Interviewees told of victim survivors being advised by accountants and finance professionals to ‘put the assets in his name and the debts in my name, and that protects us as a family’ or ‘there’s a tax benefit for the family if you sign’ without explaining the risks to her if relationship difficulties arose or they got divorced.”

Case workers recounted instances where victim-survivors were advised to put assets in their name for tax benefits or asset protection. In these cases, professional advice increased pressure on victim-survivors and provided “an appearance of legitimacy to harmful and coercive arrangements,” the study found.

Following financial abuse, victim survivors faced consequences including large, unexpected tax bills, bankruptcy and homelessness, the study warned. They also had to navigate an unforgiving commercial debt system, which had fewer protections than consumer debts.

To mitigate the risk of perpetuating financial abuse, the researchers recommended that accountants ensure they communicated all financial, tax and accounting advice to both clients when advising a couple.

They also urged advisors to interview clients separately if warning signs of financial coercion or abuse were present, to cease acting for either client after a relationship breakdown to minimise conflicts of interest, and to provide copies of financial and tax records to former clients on request.

The study also warned that the protections and support systems available for victim-survivors with commercial debts were inadequate.

“While Australia has made progress in addressing financial abuse through consumer credit reforms, there has been little recognition of how company and tax systems can also be exploited to cause harm,” Chen said. 

“We need to treat coerced business debt as a serious form of economic abuse and design safeguards to reflect that reality.”

While personal debts in Australia were regulated by stringent consumer protection laws, business debts lacked these protections and were often subject to more aggressive debt collection, the study noted.

“Victim-survivors of coerced business debt don’t have access to free dispute resolution or hardship relief like they would with consumer debt,” Jasmine Opdam, senior policy and advocacy officer at Redfern Legal Centre’s financial abuse service, said.

“Business creditors are not legally required to have hardship policies. These victim survivors often can’t afford legal representation, and the business structures they’re trapped in are costly and complex to unravel.”

Furthermore, few free services existed that assisted with business debt, as these matters often required experience in complex legal areas concerning corporations, insolvency and tax. 

“The lack of affordable help and poor recognition of financial abuse, including among victim survivors, contribute to the relative ‘invisibility’ of economic abuse through coerced business debts,” the report read.

Caseworkers also observed “widespread misconceptions” among business and government creditors, who frequently believed victim-survivors were trying to ‘game the system’ and find an easy way out of debts from a relationship.

To mitigate systemic harm from coerced business debt, the study recommended reforms including:

• Tightening safeguards in the director and ABN registration processes.
• Extending consumer-style protections to small business lending.
• Reforming corporation and tax laws to recognise that directors may be prevented from managing companies due to family violence. 
• Family violence policies modeled on the Australian Banking Association’s guidelines to encourage business creditors to respond constructively. 

It also called on professional accounting bodies to continue raising awareness about financial abuse and its warning signs to address knowledge gaps.

“While accounting industry bodies have begun to invest in capacity building and awareness raising of financial abuse, levels of awareness and understanding within the profession remain relatively low,” the report noted.