Aged care giants under fire
A Senate inquiry has shone a light on the murky financial and tax practices of Australia’s biggest for-profit aged care providers.
It raises questions about what they have to hide,” said the inquiry’s acting chair, NSW Labor Senator Jenny McAllister.
“Labor Senators are keen to hear from two of Australia’s largest for-profit aged care providers. We’ll be looking at what procedural options we have to make sure that happens.”
The Tax Justice Network (TJN) said Bupa, which operates in several countries, appeared to be engaged in “a global pattern of aggressive tax avoidance”.
TJN researcher Jason Ward said Bupa’s businesses in Australia, particularly aged care, had benefited heavily from government funding.
Also, it appeared that Bupa had structured its business in ways to minimise corporate tax obligations.
“Bupa’s sale of interests in its Australian partnership generated profits in the UK of over $568 million in 2016 and left an Australian entity with billions in debt,” Ward’s submission said.
“The Bupa case provides a clear example of the need for government reforms to mandate greater transparency and public accountability for government funding given to for-profit companies.”
Senator McAllister said tax officials told the inquiry they had concerns about tax arrangements used by some companies in the aged care sector.
“Senators heard that one of the sector’s largest operators – Opal – paid their owners more than $15 million in dividends in a year that their operating company paid no tax,” she said.
“Another large operator – Allity – were paying close to 15 per cent interest on a loan to a related party, an arrangement tax officials said could rarely if ever be described as arm’s length.
“For-profit aged care providers depend on government subsidies. Australians rightly expect that this money will be used to provide care for vulnerable and older members of our community, not hidden using tricky accounting practices.”
Allity told the inquiry the claim that the company engaged in aggressive tax planning and tax avoidance was “false and unsubstantiated”.
However, Jason Ward described the loan with its very high 15 per cent interest rate as a way for Allity’s investors “to extract a profit that is not subject to taxation in Australia”.
“It is hard to imagine that this shareholder loan at 15 per cent was cheaper than other funding options or predominately for commercial purposes and not tax minimisation,” Ward said.
“There is no doubt that these interest charges significantly reduced taxable income.”
Leading finance journalist Michael West said the 15 per cent interest rate on the Allity loan was seven times the prevailing cash rate.
“One of the main tricks of the trade in avoiding tax is getting loans from a related party offshore and paying high interest rates on it to get the money out of the country in lieu of paying tax,” he wrote.
Ward said Regis appeared to pay a higher share of taxes than other for-profit companies.
However, this may have been motivated by the $33 million in fully-franked dividends (dividends on which the company has already paid tax) received by the company’s two founders and largest shareholders, he added.
In addition, Regis’s top six executives and five non-executive directors received $5.4 million in total salaries and fees in 2017.
This was equivalent to 7.4 per cent of Regis’s total net profit after tax.
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