A dangerous tax loophole that has left thousands of vulnerable Australians with hidden debts may soon be closed by the federal government.
Perpetrators have been exploiting the system through a little-known form of economic abuse called “coerced directorships”, which can saddle victims with millions of dollars in unexpected tax debts and penalties.
Coerced directorships occur when abusive partners force, pressure, or deceive victim-survivors into becoming directors of businesses that the abuser controls. In some cases, victims are even listed as directors without their knowledge. This manipulation can result in years of unnoticed tax liabilities, heavy fines, and responsibility for corporate misconduct.
Monash University senior lecturer Vivien Chen said the impact of this hidden form of economic abuse is significant. She noted that abusers may sabotage businesses, siphon assets, or pressure victims into signing documents without understanding the legal consequences—often under threats to cut off financial support.
In many cases, perpetrators take financial benefits from contracts and then resign as directors, leaving the victim solely responsible for mounting debts. One survivor recalled, “He had disappeared, so all the creditors were chasing me for the debts from the business – they couldn’t find him.”
Chen highlighted that this issue is understudied in Australia, despite women being particularly vulnerable due to the large number of family-operated businesses. Victims also face fines of up to $1.375 million under recent corporate law reforms.
To address the issue, Chen and the Economic Abuse Reference Group have called for major reforms, including amendments to the Corporations Act 2001 to recognise family violence as a reason for absence from company management, and changes to the Taxation Administration Act 1953 to provide a family-violence defence against liability.
Assistant Treasurer Daniel Mulino said the government is committed to cracking down on the misuse of directorships by abusers. He stressed that too many people have been left with debts they never agreed to and penalties for decisions they never made.
A new consultation paper outlines proposals such as strengthening ASIC’s powers to remove non-consenting company directors, improving victims’ access to the ATO, and introducing stronger criminal penalties for fraudulent or coerced director appointments. Public submissions will remain open until December 24.
In Australia, economic abuse can be a criminal offence when it involves fraud, coercion, or theft. All states and territories recognise economic abuse as a form of domestic violence and offer protection through domestic violence orders, although these are not commonly used to safeguard financial assets. However, there is currently no specific law that directly addresses coerced directorships.
