gt aged care prudential seminar 2012
TRANSCRIPT
© 2012 Grant Thornton Australia Ltd. All rights reserved.
New arrangements for accommodation bonds and
other prudential requirements
Are you ready?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Introduction and Welcome
• The Reform process
• The use of accommodation bonds and scale in Australia
• Regulatory arrangements and risk management
• The Aged Care Financing Authority
– Objectives
– Regulation of fees
– Regulation of Accommodation Bonds
• Grant Thornton's role in the reform process
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Session Overview
• Introduction and Background
– Cam Ansell: Partner, National Head of Aged Care and Retirement
Living, Grant Thornton
• Background and Policy Perspective
– Anne-Louise Dawes: –Director, Prudential and Approved Provider
Compliance Section - Department of Health and Ageing
• Overview of Requirements (Existing and New)
– Jeff Vibert: Partner, Head of Audit (Perth), Grant Thornton
• Record Keeping – Practical Issues
– Craig Simon: Partner, Privately Held Business, Grant Thornton
• Case Studies/Questions
• Refreshments and networking
© 2012 Grant Thornton Australia Ltd. All rights reserved.
• Overview of audited annual prudential compliance
statement (APCS)
• Preparation and audit of APCS "permitted uses statement"
• Approach to determining sources and applications of bond
monies
• Issues re "permitted uses":
– Capital expenditure
– Investment in financial products
– Debt repayments
– Operating losses for first twelve months
• Transitional arrangements
• What auditors will want to see
New APCS
© 2012 Grant Thornton Australia Ltd. All rights reserved.
New APCS
• The annual audited APCS form has been required for many
years - due within 4 months
• Historically has concentrated on bond refund compliance
and bond refund capacity
• Requires providers and auditors to assess
going concern / solvency issues for next
twelve months
© 2012 Grant Thornton Australia Ltd. All rights reserved.
New APCS
• APCS form and instructions have been completely
re-written along with Auditors' Guidelines.
• Sent to providers in July 2012
• Two major areas in form covering:
– Accommodation bonds and entry contributions
including refund practices and interest
– Prudential standards (liquidity, records standard,
disclosure, permitted uses, governance/IMS)
• Major change from prior years is around "permitted uses"
and "governance"
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Accommodation Bond Records and Refunds
• No real changes to requirements
• Still required to disclose full details of any non-compliance
with refund timeframes and interest calculations
• Auditor needs to sign off on these exceptions
• Providers' policies re obtaining probate prior to bond refund
vary – need to follow own policy
• Important that bond registers contain all
required information and are kept fully up
to date and reconciled to accounting
records
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Prudential Standards
Four broad categories:
• Liquidity and liquidity management strategy
• Records standard
• Disclosure obligations
• Governance
Permitted uses of accommodation bonds is a
separate set of legislative requirements
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Liquidity
• No changes to basic liquidity requirements
• Written liquidity management strategy
• All providers still required to have sufficiently liquidity to
refunds bonds and entry contributions as they fall due in the
following 12 months
• Need to establish minimum level and
form of liquidity
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Records Standard
• Again no changes from previous rules
• Requires accommodation bond register
• Data in register must comply with section 23.38 of User
Rights Principles
• We often find registers are deficient or do not
reconcile with accounting records
• An integrated solution is best
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Disclosures to Residents
• Basic requirements unchanged although some relief from
1 October 2011 re certain detailed information (now on
request only)
• Basic requirements include:
– entering into an accommodation bond
agreement within 21 days
– minimum contents of agreement and copy
to resident or representative within 7 days
– written guarantee of refund
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Disclosures to Residents
• Prior to 1 October 2011, provider required to give
residents/representatives certain information within four
months of year end regarding prudential compliance
including bond register entry and prudential audit opinion
• As from 1 October 2011this information is on request only
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Governance Standard
• New standard applying from February 2012
• Requires accommodation bonds holders to implement and
maintain a written governance system
• System is to ensure bonds are only used for "permitted uses"
and bonds are refunded in
accordance with the Act
• Key requirements include allocation of
responsibilities, monitoring and controlling
delegations, reporting mechanisms and
training key personnel responsible for bonds
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Governance Standard
• Governance standard also covers situation where bonds
are invested in financial products other than deposits with
an authorised deposit-taking institution
• If this is the case there must be a written investment
management strategy in place (IMS)
• IMS must be approved by those charged with
governance (i.e. board)
• Provider must ensure compliance with the IMS
and update or modify if necessary
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses of Accommodation Bonds:
Overview
• The most significant area of reform in prudential
requirements
• Took effect from 1 October 2011with a two year transition
period to become fully compliant
• During transition, providers may still use post-Oct 2011
bond funds for a purpose related to providing residential
aged care – still need to have sufficient liquidity
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses of Accommodation Bonds:
Capital Expenditure
• Acquire land for, building or significantly
alteration of residential care / flexible care
facilities
• Acquire or install furniture, fittings or
equipment for residential care/flexible care facilities
• Must be initial erection or "significant alteration or significant
refurbishment"
• A number of practical issues around interpretation of these
requirements and effects on records
• Bond funds therefore unavailable for development of
independent living facilities etc.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses of Accommodation Bonds:
Investments in Financial Products
• Deposits with banks, other ADI's
• State and Federal Government bonds, debentures, stocks
• Securities
• Registered managed investment schemes
• Unregistered managed investment schemes
established for the purpose of investment
in residential aged care/flexible care
• Definitions are referenced back to the
Corporations Act 2001 (S 764A)
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses of Accommodation Bonds:
Other Permitted Uses
• "Conditional loans" for capital works or other permitted
purposes (normally to related entities)
• Refunds of bond balances
• Repayment of debt accrued for:
– Capital expenditure or refund of bonds
– Pre-October 2011 aged care operations
• To meet reasonable business losses during
the first 12 months of operating a service
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses of Accommodation Bonds:
Practical Issues
• Record keeping/tracking issues and effects
on accounting systems
• No need for separate "buckets" to track but
still a challenge to ensure compliance
• Assessing capital expenditure as "significant"
• Practical issues where mixed development occurs
• Ensuring banks understand effects on project financing
• Still doesn't appear to restrict related entity loans and
investments as long as rules are observed
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Reporting of Permitted Uses
• APCS form now includes a "permitted uses statement"
• Department allows same information to be included in the notes
to the GPFR (approved provider level)
• Need to tick correct box on the APCS
otherwise need to submit by 31 October
with APCS form
• No time extension for permitted uses
statement
• Can choose to report bonds received for full
financial year or just for period since 1 October 2011
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Reporting of Permitted Uses:
Basic Approach in Reporting
"Source of Funds"
• Bonds received for the period (either 9 months or 12
months this year);
• Less allowable reductions from bonds (interest, extra
service charges, retentions);
• Plus gross funds "returned from sale or redemption of
financial products" invested in after 1 October
2011(regardless of original
source of funds)
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Reporting of Permitted Uses:
Basic Approach in Reporting
"Application of Funds"
• By category of permitted uses (including refunds of bonds)
• Includes gross investments in permitted investments
In effect, if sources less than applications for the period, the
provider has complied without reliance on transitional
provisions
Extent to which transitional provisions relied upon to be
disclosed
© 2012 Grant Thornton Australia Ltd. All rights reserved.
What will your auditors be looking at?
Legacy Requirements
• Ensure accommodation bond register has required details and
properly maintained/reconciled
• Bond agreements in place with proper disclosures
• Whether bonds have been refunded in accordance with the Act,
deduction from bonds proper
• Compliance with LMS, solvency issues, capacity
to repay bonds – forward looking focus
• Ensure non-compliance with any prudential
requirements are reported on the APCS form
© 2012 Grant Thornton Australia Ltd. All rights reserved.
What will your auditors be looking at?
New Requirements
• Systems and procedures around managing compliance with
rules as to bond usage including review of compliance with
governance requirements
• How permitted uses statement has been compiled
including support for all sources and applications
• Assessing capital expenditure, nature of financial
products invested in, debt repayments, loan
advances and calculation of "reasonable business
losses"
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Summary and Conclusions
Questions for providers and their boards to ask:
• Do we understand all of the new requirements?
• Do we have the appropriate paperwork and record
keeping processes in place?
• Do our accounting systems support the required
data
collection?
• Are we relying upon transitional arrangements and
can we
become fully compliant within two years?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Managing your accounting records to maximise
compliance
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Practical Considerations
• Money is fungible – it is interchangeable and capable of
mutual substitution (i.e. no difference between $1 and
another $1 regardless of its origins or intended use).
• Providers not required to track $1 for $1 on a first in first out
basis or operate separate "buckets".
• Providers responsibility to ensure systems in place to
enable reporting and compliance (note transition period ends
September 2013).
• Challenges will be around extracting the required information
in the most efficient way and to ensure compliance.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Accounting Records and Systems
• Approved providers may need to consider making
adjustments to their operating and financial management
• Ensure staff are appropriately trained in relation to the
new requirements (i.e. what constitutes a "permitted use")
and any updated accounting procedures.
• Preference is to operate a detailed integrated bond register
with the accounting system (to ensures balances are
reconciled).
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Accounting Records and Systems (continued)
• Where expenditure includes a residential and non-
residential aged care component the provider and auditor
need to agree a "reasonable" means of allocating the
expenditure between the two components.
• Important to maintain high quality accounting records where
the two year transitional provisions are being relied on.
* Please note these issues will be discussed in the case studies.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Issues to consider – managing of records and
information
• Depending on the size and complexity of the provider and
the number of accommodation bonds held, the provider
may need to consider the following to ensure the required
data is captured:
– Separate bank account for accommodation bond
inflows and outflows for "permitted uses" (quarantining).
– Separate accounting (general) ledger records or "sub-
accounts" for permitted and non-permitted uses.
– Use of a "job costing" or cost centre to
allocate inflows and outflows to a
"job cost".
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Issues to consider – managing of records and
information
• Auditor will ask how the Permitted Uses Statement has
been compiled and request full information to support all
sources and applications.
• Consider treating all bonds post 1 October 2011 in
accordance with the new provisions to minimise
accounting costs in maintaining separate systems.
• Ability to report on permitted uses from any funding source
– not just from accommodation bonds.
• Note information gathering powers of the Department -
providers can be asked to provide evidence of their
compliance at any time.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Other Considerations
• Ability to report Permitted Uses Statement on either the
APCS (due 31 October) or General Purpose Financial
Statements (due 30 November) at the approved provider
level only.
• Need to tick the correct box on the APCS
– no time extension for Permitted Uses
Statement. • Discuss your options with your software provider.
• Be wary of potential short term cash fluctuations – bonds
may previously been used to manage fluctuations in
operational cash flows (i.e. 3 pay cycles in a month).
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses - Capital Expenditure
Question 1 (a)
An approved provider obtained financing to build a multipurpose facility; the
facility will be designed 70% for residential care services and 30% for
independent living units, which represents the relative % cost allocations
between each.
Can the approved provider use existing accommodation bonds or
accommodation bonds received after 1 October 2011 to repay the debt on
financing the above multipurpose facility?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses - Capital Expenditure
Answer 1 (a)
Yes, however only to the extent that debt is accrued for the purposes of
permitted capital expenditure for residential aged care.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses - Capital Expenditure
Question 1 (b)
What are the practical implications of this?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses - Capital Expenditure
Answer 1 (b)
• An approved provider must distinguish capital expenditure between what
was used for permitted uses and what was not.
• An approved provider must ensure appropriate records are kept.
• An approved provider must distinguish their financing between what was
used for permitted uses and what was not.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses - Capital Expenditure
Question 1 (c)
The approved provider has obtained plans for the multipurpose facility and
noted that facility will be built as a multistorey complex, consisting of the
bottom levels being residential care services and the top levels being used
for independent living units. Can the approved provider use existing
accommodation bonds or accommodation bonds received to repay the debt
specifically associated with the land?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses - Capital Expenditure
Answer 1 (c)
Where capital expenditure includes non-residential aged care purposes the
provider and their auditor need to agree upon a reasonable means of
allocating costs between the aged care and non-aged care components.
Allocation of the cost of land could, for example, be based on the proportion
of actual building costs spent on residential care buildings on or floor area.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses - Capital Expenditure
Question 2
An approved provider has a set policy to replace all furniture within one of
their facilities on a rolling basis over the next 24 months.
Can the approved provider use existing accommodation bonds or
accommodation bonds received to fund the refurbishment?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses - Capital Expenditure
Answer 2
The acquisition of furniture used in providing residential care or flexible care
is a permitted use where the premises are initially erected or following an
extension, a significant alteration or significant refurbishment.
Therefore does this meet the definition of a significant refurbishment?
The example is solely about replacement of furniture without mention of a
refurbishment and therefore the expenditure would not be a permitted use of
bonds.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Loans for Capital Expenditure
Question 3 (a)
An approved provider has a related party, who has constructed a residential
care facility through obtaining external finance. Can the approved provider
use existing accommodation bonds or accommodation bonds received to
fund the related party development?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Loans for Capital Expenditure
Answer 3 (a)
The approved provider may make a loan to the related party which may be
used for direct payment of capital expenditure by the borrower but cannot be
used to repay debt incurred for capital expenditure.
A number of providers have identified difficulties with this, for instance where
a related property company borrows funds from a finance company and then
wishes to repay that debt using borrowed accommodation bonds. The
Department is considering whether legislative amendments may be
appropriate.
Until 30 September 2013 providers may utilise provisions of the two year
transition period.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Loans for Capital Expenditure
Question 3 (b)
An approved provider has a related party, who has is going to construct a
residential care facility. The approved provider will use existing
accommodation bonds or accommodation bonds received to fund the related
party development.
On what conditions is this loan allowed to be made and what are the practical
implications of these?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Loans for Capital Expenditure
Answer 3 (b) Approved providers may use accommodation bonds to make a loan that meets the
following conditions:
• the loan is not made to an individual
• the loan is made on a commercial basis
• there is a written agreement in relation to the loan
• it is a condition of the written agreement that the money loaned will only be used
for capital expenditure or investment in financial products defined by section 57-
17A of the Act
• the agreement includes any other conditions specified in the User Rights
Principles (as at 1 October 2011 there are no other conditions specified in the
User Rights Principles).
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Loans for Capital Expenditure
Answer 3 (b) cont A loan agreement on a commercial basis would normally included the following:
• a legal requirement to repay the loan within a specified period;
• a method for working out the interest payable; and
• an appropriate guarantor or other security the loan.
Practical issues:
What is an appropriate way to determine a commercial interest rate to be charged?
In assessing whether an interest rate is reasonable the department would compare the
rate charged by the provider against a number of benchmarks such as:
• Interest rates paid by the provider
• Other interest rates faced by the borrower
• Relevant market rates such as small business lending rates quoted by commercial
financiers over the course of the loan
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Loans for Capital Expenditure
Answer 3 (b) cont
Practical issues cont:
Should principal repayments be made?
The legislation does not require that loan conditions include principal repayments.
Interest-only loans are commercially available and would be accepted if the interest
rate and terms and conditions reflected the increased risk to the lender of such loans.
What is an appropriate repayment period for the loan?
A repayment period is not an explicit requirement of the legislation and, as noted
above, interest-only loans are acceptable. However, even on an interest-only loan
conditional obligations to repay the loan in circumstances such as sale of the property
or need for funds by the provider would be expected.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Loans for Capital Expenditure
Answer 3 (b) cont
Practical issues cont:
What security is required on a related party loan?
If comparable commercial rates to be used are for a secured loan then a
charge would be required.
A guarantor is not an explicit requirement and is not necessarily implied by
the need for the loan to be on a commercial basis.
The existence and nature of a guarantee may be a factor to be considered in
the provider’s Liquidity Management Strategy.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Loans for Capital Expenditure
Question 4 (a)
An approved provider notes that they have existing loans receivable and
payable in place that do not meet the conditions of a permitted use loan
(however were incurred for aged care purposes) prior to 1 October 2011, are
these loans required to be recognised separately?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Loans for Capital Expenditure
Answer 4 (a) Whether it is for bookkeeping purposes, for the ease of determining an appropriate
interest charge or for statutory reporting purposes, loans that are non-interest bearing
with no fixed term of repayments should be maintained separately.
• There is no requirement or obligation for providers to review loans that existed at
30 September 2011 if bonds received on or after 1 October 2011 will not be
loaned under those terms and conditions.
• Repaying debt accrued for provision of aged care prior to 1 October 2011 is a
permitted use of bonds received on or after that date. This does not require
reliance on the two-year transition period.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Loans for Capital Expenditure
Question 5
A group of companies with multiple approved providers has a group treasury
function; the internal policy is to remit all additional funds to a central account
that is held on deposit with an ADI.
What challenges would this approved provider face with the new permitted
uses requirements?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Loans for Capital Expenditure
Answer 5 This process would need to be documented as part of each provider’s governance policy
and reflected in their Liquidity Management Strategy.
As detailed above, the approved provider will need to have a written agreement for all new
accommodation bonds loaned that states the following:
• a condition of the loan that the money loaned will only be used for capital expenditure
or investment in financial products defined by section 57-17A of the Act;
• a method for working out the interest payable.
Practically can the above terms be included within a group financing facility?
Would need a system to track surplus accommodation bond balances within the group
treasury.
Inter-entity funds loaned by provider to group treasury would not count as permitted uses.
Would need to be loaned back and reinvested for permitted uses.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Investment in Financial Products
Question 6
An approved provider currently has all excess funds from the receipt of
accommodation bonds held within a Catholic Development Fund. Is this
appropriate under the new permitted uses requirements?
[The assumption is that the Catholic Development Fund is a Religious
Charitable Development Fund (RCDF) listed in Banking Exemption No. 1 of
2011]
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Investment in Financial Products
Answer 6 If the approved provider and the RCDF are the same legal entity then bonds may
become part of the RCDF monies without the need for loans or other instruments.
The bonds may be used for the full range of permitted uses and the provider would
need to report on the use of the bonds. It should be noted that use of bonds for non-
aged care purposes has never been allowed under the Aged Care Act 1997.
For providers that are separate legal entities from their RCDF, bonds can only be
transferred to the RCDF as a loan or through the RCDF issuing securities to the
provider.
The two-year transition period enables affected providers and their RCDFs time to
make necessary changes to documentation and processes while continuing to invest
bonds in RCDFs.
The department is consulting with a number of stakeholders regarding the use by
providers of RCDFs.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Investment in Financial Products
Question 7
An existing provider has held an investment in an ASX listed company since
June 2009
The provider has occasionally used new accommodation bonds to cover any
operating losses.
During the June 2014 year, the provider uses new accommodation bonds to
service losses rather than sell their existing investment. Is this treatment
appropriate under the new permitted use arrangements?
Is it practical for a provider to sell an investment and use those funds to
cover operating losses, only to then re-purchase the investment with
additional accommodation bonds received?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Permitted Uses Investment in Financial Products
Answer 7
The provider needs to demonstrate that it has complied with the permitted
uses and that bonds have not been used for non-permitted purposes such as
operating expenses (other than as allowed for the first 12 months of operating
a service). This may require the provider to fund operating losses from
sources such as redemption of investments or borrowing funds.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Repayment of Debt Accrued for the Purposes of
Capital Expenditure or Refunding Accommodation
Bonds
Question 8
An approved provider had planned to build two facilities, one for residential
care services and the other being independent living units. Both facilities are
anticipated to cost the same amount to construct.
At the end of year one, the residential care services facility was almost
complete, yet construction on the independent living units was yet to
commence. The residential care services facility was funded through cash
reserves.
During the second year the approved provider received accommodation
bonds from the operation of the new facility. Can the approved provider use
these bonds to fund the construction of the independent living units?
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Repayment of Debt Accrued for the Purposes of
Capital Expenditure or Refunding Accommodation
Bonds
Answer 8
The approved provider cannot use the bonds for the purposes of constructing
the independent living units. Accommodation bonds may only be used for
permitted uses. Independent living units are not capital expenditure within the
meaning of section 57-17A(2) of the Act as they are not premises for
providing residential care or flexible care.
The provider needs to demonstrate that it has complied with the permitted
uses and that bonds have not been used for non-permitted purposes such as
operating expenses (other than as allowed for the first 12 months of
operating a service).
It should be noted that use of bonds for non-aged care purposes has never
been allowed under the Aged Care Act 1997.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Case Study
Existing aged care provider ABC Pty Ltd ("ABC")
Using the fact pattern below, please complete the APCS Cash flow
statement for ABC Pty Ltd for the year ended June 2013.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Case Study
Background
ABC’s cash and term deposits increased from $300K (June 2012), to 850K (June 2013).
ABC provided a loan to a related party for $500K to build two facilities one for residential care
services and the other being independent living units. Each facility is estimated to cost $250K.
ABC received $2.5M in accommodation bonds during the year.
ABC invested $700K in an unregistered management investment scheme, established for the
purposes of investment in commercial property.
ABC refunded $1M in accommodation bonds during the year.
ABC had net cash outflows from operations of $600K, $100K of which related to new operation
that commenced within the last 12 months.
ABC lends $400,000 to a related party to allow the related party to repay debt owing on aged
care construction loans
ABC repaid $200K of debt accumulated pre 1 October 2011.
ABC sold an ASX listed investment that it has held since 2005 for $1.45M.
© 2012 Grant Thornton Australia Ltd. All rights reserved.
Solution
Bond Money Received Total Value Expenditure on Permitted Uses Total Value
Accommodation bonds Total on *Capital expenditure $ -
Accommodation bonds received between the period of 01/07/12 and 30/06/13
$ 2,500,000 Total investments made in financial products post 01/10/11
Allowable deductions from accommodation bonds received between the period of 01/07/11 and 30/06/12 (retention, interest on outstanding bonds, extra service)
$ *Deposits made with authorised deposit-taking institutions $ 550,000
*Returned funds
From (sale/disposal/redemption) of financial products $ *Other financial products $ -
*Loans made for capital works or investments $ 250,000
*Refunds of bonds and Entry Contributions $ 1,000,000
Debt repayments – for incurred debt on:
1. *Capital expenditure $
*Accommodation bond refunds $ -
*Repayment of pre 01/10/11 debt for providing aged acre to care recipients
$ 200,000
*Reasonable business losses between 01/07/12 and 30/06/13 (first 12 months of operating a service)
$ 100,000
Use of transition arrangements (bonds only) $ 400,000
*refers to gross redemption or expenditure from any source not just accommodation bonds.