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Tax avoidance by for-profit aged care companies

A new report presents preliminary analysis demonstrating how for-profit aged care providers use known loopholes in the system and cleverly disguised corporate structures and tactics to maximise operating income and avoid tax, while taking advantage of generous, tax-payer funded government subsidies.

The Australian Nurses & Midwifery Federation (ANMF) commissioned the report from the Tax Justice Network – Australia.

Here are some excerpts from the report:

In Australia and globally, there has been a significant media focus on tax avoidance by multinational resources companies, such as Chevron and Exxon, and on technology companies, such as Apple and Google, but little focus on companies providing social services. This report reveals that companies providing social services, and benefitting from government funding, are also using complex tax avoidance schemes.’

One common method of tax avoidance is the creation of complex corporate structures and related party transactions to shift profits into jurisdictions and entities that allow for a reduction in tax payments. In Australia, stapled securities and related corporate structures are one way that companies, including for-profit aged care companies, have shifted profits and reduced tax payments.’

The fact that these companies derive profits from services provided by tax payments of other individuals and companies, and then avoid tax payments, makes this tax avoidance particularly egregious and must be addressed as a matter of urgency.’

Aged care will continue to be one of the fastest growing areas of government spending and will continue to be of growing importance in terms of jobs and employment. It is vital that all parties come together to push for additional reforms to ensure accountability of government spending and that for-profit companies fulfil their tax obligations.’

Recommendations from the Report:

  • Any company that receives Commonwealth funds over $10 million in any year must file complete audited annual financial statements with Australian Securities and Investments Commission (ASIC) in full compliance with all Australian Accounting Standards and not be eligible for Reduced Disclosure Requirements.
  • Public and private companies must fully disclose all transactions between trusts or similar parties that are part of stapled structures or similar corporate structures where most or all income is earned from a related party and where operating income is substantially reduced by lease and/or finance payments to related parties with beneficial tax treatment.

You can read the full Report here.

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