February 2025 – Ashley Lovelock
Revenge Debt: When Your Ex’s Tax Becomes Your Nightmare
A recent judgment by the Federal Circuit and Family Court of Australia has drawn media attention for all the “wrong reasons,” shedding light on “revenge debt” and how it is weaponised in family law disputes.
A very brief case summary:
- Wife was in family law proceedings with her ex-de facto partner after a six-year relationship.
- She had been previously married and lived with her son in a home she owned.
- Her new partner moved in and later revealed he owed over $50,000 in tax debt. He asked her to help draft a letter to the ATO for a payment plan, but she heard nothing further.
After their 2018 separation, her ex refused to leave the home for 12 months. In 2021, he filed a court application seeking a property adjustment. The case revealed he had not lodged tax returns for a decade. Two years after their breakup, he filed 10 years’ worth of returns—including periods before their relationship—and was assessed as owing over $300,000 to the ATO.
His argument? That the entire debt was a “spouse-inherited tax debt,” making the wife responsible.
The Court ruled the tax debt was a joint liability, factoring it into their property settlement—even for the years before their relationship began. The wife was ordered to pay her ex nearly $500,000 within 90 days, or her home would be sold!
Lacking the funds, she lost her home.
This case highlights how debts—particularly tax debts—can be used as financial abuse to exert control over a partner. Dubbed “revenge debt,” this tactic manipulates financial systems to harm and assert control over a former spouse.
Changes to the Family Law Act
Recognising this issue, amendments to the Family Law Act will take effect on 10 June 2025, classifying financial abuse as a form of family violence in property settlements.
These reforms will also require the ATO to hold the correct party accountable for tax debts, preventing further financial harm to victims who are trying to recover.
While these legal changes are forthcoming, strategic legal action can already protect victims—but only if your lawyer knows how. If you are facing financial abuse in family law matters, experienced legal representation is crucial.
At Harris Freidman, our accredited specialist family lawyers have successfully handled these cases and can help you navigate complex financial disputes.
If you need advice on financial abuse in family law, contact us today.