Modern Australian
The Times

Australia is turning the spotlight on financial abuse in relationships. What can NZ learn?

  • Written by Jonathan Barrett, Professor of Taxation and Commercial Law, Te Herenga Waka — Victoria University of Wellington

It’s a problem as old as marriage and money: one spouse, usually the husband, using financial control to dominate the other.

From restricting spending and hiding debts, to forcing someone into legal or financial arrangements they don’t understand, financial abuse has long been a tool of power and coercion within intimate relationships.

While laws that once treated married women as legal minors have been dismantled, financial abuse remains widespread – and largely hidden. Increasingly, it is being recognised not just as a private harm, but as a systemic one, shaped by legal, tax and corporate systems.

The issue has been receiving much attention in Australia, where it has been estimated as many as one in six women are financially abused.

There is no reason to expect the problem is any less severe in New Zealand and the case for closer investigation and policy attention is just as compelling.

As Australia moves to reform its systems, the question for New Zealand is what lessons can – and can’t – be imported.

What is financial abuse?

Broadly, financial abuse can include stealing money or property, failing to repay loans, or coercing someone into handing over assets or selling property for another’s benefit.

Unlike in New Zealand, Australia has a dedicated Tax Ombudsman with statutory powers to investigate whether tax administration benefits the community.

Last year, its office released a report examining how economic abuse plays out within the tax system, following earlier parliamentary inquiries and a national “systems abuse” audit.

The Australian Treasury has also launched a public consultation on tackling financial abuse linked to coerced or fraudulent company directorships.

Together, these initiatives signal growing concern about how legal and financial systems can inadvertently enable abuse, even as the true scale of the problem remains unclear.

One particular issue stands out: fraudulent or coerced directorships, in which people are unknowingly or unwillingly made legally responsible for companies they do not run.

Under Australian law, this can carry severe financial consequences. While the Australian Tax Office is normally treated as an ordinary creditor when a company is liquidated, it also has the power to issue a director penalty notice, which can make company directors personally liable for unpaid tax.

In some cases, this liability takes immediate effect. In others, directors have just 21 days to pay outstanding PAYG (equivalent to PAYE in New Zealand), GST and superannuation debts before enforcement begins.

While these strictly enforced penalty notices act as a strong deterrent to directors who genuinely control companies, they can be highly problematic for innocent people who have been coerced into directorships or appointed without their knowledge.

Consider the example of “Anna”. After she receives a large inheritance, Anna’s husband sets up a company and secretly appoints her as its sole director, without taking on that role himself.

When the business runs into financial trouble and fails to pass on tax deducted from employees’ wages, Anna – who has had no involvement in running the company – becomes personally liable.

Because she is listed as the director, the Australian Tax Office can issue her with a director penalty notice, putting her inheritance and personal assets at immediate risk.

What this means for New Zealand

Different rules apply in New Zealand. Inland Revenue currently has no equivalent power to issue director penalty notices and must generally rely on the liquidation process to recover unpaid tax from insolvent companies.

While the tax department ranks ahead of many creditors, personal liability for directors arises only if a court considers it just: a high threshold.

In practice, it is highly unlikely a court would order compensation from someone who played no role in managing a company and was coerced into becoming, or fraudulently appointed as, a director.

This suggests that the specific weaponisation of company directorships observed in Australia may be far less prevalent in New Zealand. But it does not mean financial abuse is any less common, only that it may operate through different legal and institutional pathways.

Indeed, New Zealand company law arguably treats dishonest directors too leniently, while Australia’s tougher enforcement regime highlights how blunt legal instruments can unintentionally compound harm for abuse victims.

Recent Australian investigations acknowledge this tension, but also reveal how difficult it is to design systems that deter wrongdoing without trapping the innocent.

In New Zealand, we know that financial abuse is common – it is a normal consequence of a power imbalance in an intimate relationship. But we must also understand how it is happening before it can be alleviated. Australian experience doesn’t provide simple answers.

Authors: Jonathan Barrett, Professor of Taxation and Commercial Law, Te Herenga Waka — Victoria University of Wellington

Read more https://theconversation.com/australia-is-turning-the-spotlight-on-financial-abuse-in-relationships-what-can-nz-learn-272416

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