Aged care royal commission told some of the biggest providers are using complex corporate structures

This article is more than 1 year old

This article is more than 1 year old

Some of the biggest family-owned aged care companies in Australia have been accused of using complex corporate structures to minimise their tax bill.

A new report from the Tax Justice Network Australia and the Centre for International Corporate Tax Accountability & Research has been submitted to the aged care royal commission. It highlights concerns about “aggressive tax minimisation strategies”.

The report examines TriCare, Arcare, Aegis, McKenzie, Hall & Prior, and Thompson.

The report praises Thompson, saying it appears to demonstrate that a private family-owned aged care company can make a decent profit and pay its fair share of tax.

But the other businesses were strongly criticised.

The O’Shea family’s TriCare, one of Queensland’s largest for-profit aged care businesses, comes under fire for its use of companies in Norfolk Island.

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Norfolk Island is an Australia territory but was a tax haven until 2016 when it lost self-government and was brought into the national system. Pre-existing Norfolk Island companies continue to be exempt from capital gains tax.

“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 minimize all tax liabilities,” the report says.

The report notes O’Shea brothers John and Peter are donors to the Liberal National party in Queensland and have donated $130,000 over a two-year period.

Peter O’Shea said the profit from TriCare’s businesses, including residential aged care, are fully taxed in Australia.

“All TriCare companies, including those registered in Norfolk Island, are treated as Australian residents for taxation purposes,” he said in a statement.

“Neither TriCare nor its shareholders have received any tax benefit (either before or after 2016) in relation to Norfolk Island.”

He said TriCare has been audited twice by the Australian Taxation Office in the past decade.

The Knowles family’s Arcare also attracted scrutiny over its use of trusts.

“Tax avoidance from interest free loans from the trusts to directors and family members have caught the attention of the ATO in the past but appear to continue into the present,” the report says.

Comment has been sought from Arcare.

The report notes a lack of public information on the corporate structure or finances of McKenzie Aged Care, which has received more than $112m in federal funding.

None of the companies involved in the Aegis Aged Care Group filed any current financial statements with Australian Securities and Investments Commission.

No Hall & Prior-related companies file any financial statements with Asic, the report said.

The report urges the federal government to mandate that aged care businesses receiving more than $10m a year in taxpayer funding should file company accounts that are publicly accessible.

It also called for a public registry of beneficial ownership and minimum 30% tax on distributions from discretionary trusts. Federal Labor has already announced it wants to crack down on discretionary trusts as a tax avoidance measure.

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The Australian Nursing and Midwifery Federation’s federal secretary, Annie Butler, said aged care providers must be made accountable for the millions of dollars they receive in government subsidies.

“The fundamental question is whether care is being compromised for the sake of increasing profits,” Butler said.

Meanwhile, the aged care royal commission hearing in Sydney on Thursday was told residents are “stateless”.

“What currently happens is most of us sit around waiting for them to die and if they die quickly then it’s good job done, everyone sort of thinks it’s a good thing, and it’s clearly not,” the Monash University professor Joseph Ibrahim said.

“In residential care, it seems to me no one has been angry for a long time … because the product of residential aged care … is death. Every year 50,000 people die and that’s what we expect, so things are happening smoothly.”

Ibrahim, who has studied deaths in aged care, lamented residents are not given the “dignity of risk” to do what they want and enjoy their lives. Instead they are lumped with selected safe activities such as bingo and jigsaw puzzles.

“The generation that’s in residential care at the moment are 80 … who had a hard life, made do, compromised, self-sacrificed and don’t complain. We think we’re doing a good job because our mothers or grandmothers or great-grandmothers have the personality type that sacrifices for everyone else and we’re doing them a huge disservice,” Ibrahim said.

The hearing continues.