Six top aged care operators reap $2 billion from taxpayers, pay little tax

Wherever taxpayer dollars up for grabs, rent-seekers will be there by the dozen. In Australia’s aged care sector, governments pick up some 70 per cent of the chit while private providers rake in the profits, often deploying aggressive tax avoidance schemes. The upshot is that taxpayers effectively get hit twice.

“Any company that receives tens of millions of dollars in annual government subsidies must be required to be transparent and held publicly accountable.”

It’s a sensible principle, a principle espoused by the Australian Nursing and Midwifery Association in a report by Tax Justice Network Australia.

Australia faces a crisis in health and aged-care funding. In 2016, 15 per cent, or
one in seven Australians, were aged 65 years or older. By 2056, this percentage is expected to grow to 22 per cent or 8.7 million people.

Despite the impending crunch, the TJN report found an “alarming” failure of accountability and transparency, and rampant tax avoidance.

Among the findings:

•  The six largest for-profit companies were given over $2.17 billion in government subsidies in 2017, representing 72 per cent of their total revenue of more than $3 billion.
• The six companies reported profits of $224 million.
• Various methods were used to avoid paying tax, including stapled security trust structures and renting their aged care facilities from themselves (one security in the stapled structure rents to another). Loans from shareholders, related entities and loans between securities are also common.
• The largest company, BUPA, recorded almost $7.5 billion in total income in Australia in 2015-16 – mostly from health insurance – and paid $105 million in tax on a taxable income of only $352 million. As reported here, BUPA uses partnership entities in its complex global web.
• Its Australian aged care business, BUPA made over $663 million in 2017 and over 70 per cent ($468 million) of this was from government funding.
• The second largest operator Opal, recorded total income of $527.2 million in 2015-16 but paid only $2.4 million, having reduced its taxable income to just $7.9 million. Bear in mind  the majority of tax avoidance is likely to occur by ramping up costs/deductions and declaring a low taxable profit, rather than by paying a low tax rate.
• Opal disclosed 76 per cent of its income ($441 million) was from government funding in 2016.
• Allity had total income of $315.6 million in 2015-16 and paid no tax. Some 67 per cent ($224 million) of Allity’s revenue was from government funding in 2016-17.
• Regis, Estia, and Japara are listed on the Australian Stock Exchange (ASX) but appear to be using methods to reduce the amount of tax they pay while receiving $1 billion in government subsidies.
• Family-owned aged care companies Arcare, TriCare, and Signature receive between $42 million and $160 million each in annual government subsidies but provide very little public information about their operations and financial performance.

Health insurance spirals but you won’t know it from BUPA’s accounts