Many large family-owned for-profit aged care providers lack transparency and accountability for the public funds they receive, a new report has found.
All in the family: Tax and financial practices of Australia’s largest family owned aged care companies was undertaken by the Tax Justice Network – Australia and the Centre for International Corporate Tax Accountability and Research.
It looked at the six largest family-owned for-profit aged care providers, which include Arcare Aged Care, McKenzie Aged Care, TriCare, Aegis Aged Care, Hall & Prior Aged Care and Thompson Health Care.
The report found that in 2017-18 these organisations together received over $711 million in government subsidies to operate 12,000 beds across 129 facilities.
Report author Jason Ward said most of these providers did not make their financial statements publicly available.
“The lack of information available on financial operations of these companies is pretty stunning and alarming, and clearly there needs to be far more public accountability on public funding and transparency in terms of financial practices and spending,” Mr Ward told Australian Ageing Agenda.
“We really have no way to know what happens to the public funding these companies get,” said Mr Ward, a principal analyst for the Centre for International Corporate Tax Accountability and Research.
Thompson Health Care was the only provider in the group of six that filed its financial statements publicly.
“We did find one company, which on a relative basis does have significant transparency files, full financial statements… not to say it couldn’t be better or improved, but it shows that a private for-profit company can be transparent…,” Mr Ward said.
The report found some providers were using complex business structures, such as having multiple trusts and owners, that appear to be designed to avoid tax.
Mr Ward said a surprising finding from the report was that TriCare’s whole business structure is owned through Norfolk Island.
“One will have to ask the question, ‘why would you own an aged care business or retirement village business through Norfolk Island?’ It seems like a strange thing to do, unless there is some rationale for it, because clearly there is no upfront rationale for owning such a business through Norfolk Island,” Mr Ward said.
“The TriCare group appears to [be] able to shift equity and debt throughout the complex corporate structure, taking advantage of zero capital gains tax in Norfolk Island, in order to minimise all tax liabilities,” the report said.
Provider says it pays its taxes
In response to AAA’s enquiry, TriCare director Peter O’Shea said profit from TriCare’s businesses, including residential aged care, were fully taxed in Australia.
“All TriCare companies, including those registered in Norfolk Island, are treated as Australian residents for taxation purposes,” Mr O’Shea told AAA.
Mr O’Shea said no royalty payments, management fees or similar charges flowed to any jurisdiction outside Australia.
“Neither TriCare nor its shareholders have received any tax benefit, either before or after 2016, in relation to Norfolk Island,” he said.
The Australian Taxation Office has audited TriCare twice in the past decade, he said.
Mr O’Shea said TriCare was not contacted by Mr Ward or the TJN regarding the findings of the report.
Report ‘a distraction’
The Aged Care Guild represents seven of the largest for-profit providers including Arcare and McKenzie.
The Guild’s CEO, Matthew Richter, said this report was a distraction from bigger aged care issues.
“While I can appreciate the intent of the report, as with the previous inquiry, there are no solid findings of financial wrongdoing, and it is, quite frankly, a distraction from the greater issues at hand in the aged care sector,” Mr Richter told AAA.
Residential aged care providers are all subject to heavy regulatory scrutiny, he said.
“Every aged care provider, including our members, is required under the Aged Care Act to submit their annual financial reports to the Department of Health for activity monitoring,” Mr Richter said.
“Whether government owned, tax liable or tax exempt, every provider is given the same set of tools to work with. We’re all funded in the same way, we all need to run sustainable businesses, and we’re all subject to the same standards of accountability and care.”
The report echoes recommendations in Mr Ward’s 2018 report on the financial and tax practices of for-profit aged care providers, which sparked a senate inquiry (read our story here) that all entities receiving over $10 million a year in federal funds should file full and complete financial statements with the Australian Securities and Investments Commission.
It also recommends an immediate formation of a public register of beneficial ownership, including trusts, a minimum 30-per-cent tax on distributions from discretionary trusts and further examination of trust reform to bring Australia in line with global standards.
Mr Ward said families of loved ones receiving aged care and the public deserved to know how government subsidies were used.
The report is available here.
Comment below to have your say on this story