Coerced business debt happens when a domestic violence victim becomes unknowingly or forcibly involved in their abusive partner’s business affairs
They usually find out about the huge sums they owe when they’re unexpectedly contacted by the Australian Tax Office or a debt collector
The long-term consequences include bankruptcy, poverty, and homelessness
It’s a white-collar crime that comes with a violent backstory, and there’s generally no one there to help the stunned victims.
It’s called coerced business debt, and it happens when a domestic violence victim – almost always a woman – becomes unknowingly or forcibly involved in their abusive partner’s business affairs.
The perpetrator may register the victim with an Australian Business Number or GST or fraudulently file their tax returns. They may convince them to combine their super account with their own self-managed super or take out a second mortgage on their home.
Another common deception is to take out a business loan and name the victim as a director, making her liable for the debt.
These administrative manoeuvres are all too easy to pull off, and it’s generally only when the relationship ends that victims become aware of the situation. They usually find out about the huge debts when they’re unexpectedly contacted by the Australian Tax Office or a debt collector. From there, lives can irreparably unravel.
A national study on this under-recognised issue – published by the Redfern Legal Centre, Monash University and the Economic Abuse Reference Group (a national network of community organisations) – argues that there’s a major knowledge gap among policymakers about how business structures are manipulated to facilitate financial abuse.
The study draws on interviews with 18 frontline financial abuse counsellors from 10 community organisations across Australia. They describe a range of coercive tactics that are readily executed, including forged signatures, digital impersonation, or surreptitiously installing victim-survivors as company directors.
The long-term consequences include bankruptcy, poverty, and homelessness
Jasmine Opdam, a senior policy and advocacy officer at the Redfern Legal Centre’s Financial Abuse Service NSW and a co-author of the study, says affected women face overwhelming obstacles.
“Victim-survivors of coerced business debt don’t have access to free dispute resolution or hardship relief as they would with consumer debt,” Opdam says.
“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.”
The debts can amount to millions of dollars, and the long-term consequences include bankruptcy, poverty, and homelessness.
It’s a form of financial abuse that “traps victim-survivors in a cycle of poverty, and the psychological toll can be so devastating that some are unable to recover their independence,” Opdam says.
The long-term consequences of coerced debt include bankruptcy, poverty, and homelessness.
A policy blind spot
Associate Professor and co-author Vivien Chen of the Monash Business School says coerced debt has largely been left out of the policymaking discourse focused on other types of financial abuse.
“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 says.
“We need to treat coerced business debt as a serious form of economic abuse and design safeguards to reflect that reality.”
Sally Renfry, a financial abuse specialist at the Centre for Women’s Economic Safety, says the size of the problem is unclear, but anecdotal evidence suggests that many women are falling prey.
“It’s certainly not uncommon for the women that we work with to present with personal coerced debt, business coerced debt, or a combination of both. But there’s no national comprehensive data that lets us know how widespread this actually is.”
Renfry points out that financial abuse is a form of family violence, whether or not physical abuse occurs.
“It often goes hand in hand with emotional and psychological abuse. It’s another way to dominate, to keep someone in the dark about financial matters that affect them. We see women being told, ‘you’re bad with money, you wouldn’t understand, you don’t need to know about it’. So there is a deliberate hiding of information.”
The lack of consumer protections around business lending gives perpetrators the room they need to set these financial traps.
“Without consumer protections, where can it be escalated to?” Renfry asks. “It means there are fewer options for resolution; it means more women are left holding the debts. These cases are large, complex, expensive, and need multiple expert services to be able to resolve them. There isn’t a service that exists that can do all of this.”
One victim discovered she owed $500,000 in debts
A woman Renfry is currently advising recently found out that there’s a $400,000 tax debt plus $100,000 in director’s penalties in her name. She’s also liable for an outstanding car loan associated with her ex-partner’s business. A family lawyer has informed her that there’s no money available in any business accounts to pay the debts.
“Where does she go for support?” Renfry asks. “Tax legislation doesn’t have a provision for absolving innocent spouses. And you can’t just make it go away. Survivors of family violence are being left in a horrendous position. The impacts are long-lasting, and loss of housing is not uncommon. It’s the behaviour of individuals that causes this kind of harm, but it’s the systems and structures that allow it to happen.”
The new national study makes a number of recommendations to safeguard against coerced business debt, including:
Tightening safeguards in the company director and ABN registration processes.
Extending consumer-style protections to small business lending.
Reforming corporation and tax laws so that directors can be prevented from managing companies due to a history of family violence.
Introducing family violence policies to encourage business creditors to respond appropriately to a victim’s circumstances.
Andy Kollmorgen is the Investigations Editor at CHOICE. He reports on a wide range of issues in the consumer marketplace, with a focus on financial harm to vulnerable people at the hands of corporations and businesses. Prior to CHOICE, Andy worked at the Australian Securities and Investments Commission (ASIC) and at the Australian Financial Review along with a number of other news organisations. Andy is a former member of the NSW Fair Trading Advisory Council. He has a Bachelor of Arts in English from New York University. LinkedIn
Andy Kollmorgen is the Investigations Editor at CHOICE. He reports on a wide range of issues in the consumer marketplace, with a focus on financial harm to vulnerable people at the hands of corporations and businesses. Prior to CHOICE, Andy worked at the Australian Securities and Investments Commission (ASIC) and at the Australian Financial Review along with a number of other news organisations. Andy is a former member of the NSW Fair Trading Advisory Council. He has a Bachelor of Arts in English from New York University. LinkedIn
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