The furtive financial wizards from Brookfield may soon take $3 billion of retirement village loans to Bermuda, and taxpayer-funded nursing homes too, should their takeover bid for Aveo succeed. Their latest financial statements confirm this is all about buying key Australian assets and funnelling the profits to tax havens. Michael West reports.

ASIC searches show Brookfield, via its secretive entity BPIH Ltd, has raked $347 million in tax-free profits out of Australia to the Atlantic tax haven of Bermuda over the past two years. And Brookfield’s recent takeover of Healthscope means the profits from 43 Australian hospitals are now controlled by unknown directors in the Cayman Islands.

Australia’s tax base is being gouged and the Government and its Foreign Investment Review Board (FIRB) are nonchalant in response.

Taxpayers are likely to be even worse off if Vodafone’s bid for TPG, Shell’s bid for ERM Power and the Chinese $1.5 billion offer for Bellamy’s succeed. Yet these transactions are not so galling for taxpayers as the spectre of watching assets such as Aveo’s nursing homes and Healthscope’s hospitals vanish to tax havens.

How so? Nursing homes and hospitals are subsidised by taxpayers. To facilitate their sale to tax haven operators such as Brookfield, which is demonstrably a global tax grifter, has no basis in public interest, let alone common sense.

Of the $347 million in capital returns to its parent in Bermuda over the past two years, Brookfield’s Australian entity BPIH booked a return of $156.5 million to parent company BIP Bermuda Holdings IV Limited in 2018, and $190.5 million the year before. Its accounts for 2018 were filed months late in a breach of the Corporations Act –

Aveo’s financials show $3 billion in loans from retirement village residents. Bear in mind that residents don’t actually buy these retirement village units; they effectively make a loan to Aveo in return for a right to reside. Management fees are deducted from the loan when the resident departs.

Retirement villages: how grandma and grandpa become corporate financiers

Then there are the government subsidies for nursing home beds. Aveo’s accounts show grant income of $17 million last year, taxpayer money soon to be controlled by unknown persons in Hamilton, Bermuda.

Brookfield’s BPIH is a tricky “triple stapled security” structure which owns Australian infrastructure assets. After December balance date, it restructured, transferring its Arc Infrastructure, Enwave Holdings and DBCT Management stakes to another offshore entity.

The shakeup goes on. Brookfield is now selling all its Multiplex property fund assets and in recent days sold Tasmanian gas asset Enwave for $440 million. Returns to Bermuda may ramp up this year.

The latest BPIH accounts show a profit before tax of $349 million for 2018 and tax expense of just $12.2 million. After asset sales and reclassifications, the bottom line was a profit of $672 million.

Besides the massive returns of capital to its associates in Bermuda, Brookfield also siphoned out profits on Australian infrastructure via interest on related party loans and $46 million in management fees to the ultimate Bermudan parent.

Australian nursing homes off to Bermuda as Brookfield swallows Aveo

 

Aveo is no cleanskin on the tax front either, its financials are a morass of related party dealings. At least the Tax Office can identify the directors who control its assets though. Not so the Bermudan and Cayman Islands directors of those entities which control Brookfield.

Elsewhere, the ATO cannot be happy that Vodafone – if approved by the competition regulator – will merge with TPG. TPG has paid $321 million in income tax over the past two years. Vodafone pays nil.

It’s often the case that foreign takeover deals dud the Australian taxpayer. Brewing giant Foster’s and its CUB falling to SABMiller then the Belgian AB InBev is a case in point. Aveo and Healthscope are different beasts though. They command taxpayer-subsidised assets. Brookfield Australia and its BPIH have a huge operation in Australia, yet an operation designed to “tax-strip” this country.

The Brookfield takeover proposal now carries a recommendation from the Aveo board, somewhat a sign of desperation since it is priced at a gobsmacking 40 per cent discount to Net Tangible Assets. The company faces some ugly issues such as a residents class action for predatory business practices.

The Aveo deal is yet to win approval from FIRB but, as the Healthscope deal was waved through by FIRB and Treasury, it would appear a mere matter of time.

This reporter was subject to threats from Aveo last year and its lawyers from Freehills and Addison.

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