This week’s issue of SATURDAY is focused on who is likely to win the new aged care investment in the next five years – and the scales are tipped in favour of the larger Not For Profits looking to grow their businesses.
Check out the graph opposite from the Aged Care Financing Authority (ACFA)’s latest report for 2021.
As you can see, the balance sheets of the For Profits are far more leveraged than the Not For Profits.
These figures are not always black-and-white – For Profits tend to have more contemporary stock for example.
But they support the argument that the Not For Profits are in the best position to dominate the Australian market moving forward.
Let’s start with the tax benefits – Not For Profits are exempt from payroll tax which equates to a 3.5% saving on wages.
If you factor in loading and pay points (the specific rate of remuneration payable to employees within a Classification Level) increases, this saving rises to around 6%.
Not For Profits also don’t need to invest as much to earn a profit (surplus) because they have lower costs of capital and tend to have stronger balance sheets that make it easier to obtain bank finance.
They also typically have more access to land banks. The banks report to us that they are seeing more activity in the Not For Profit space in retirement villages as confidence grows in the sector, with a number of operators developing land banks they have had in their portfolio for some time.
Importantly, Not For Profits have better access to the executive talent to drive their business forward.
At the 2021 LEADERS SUMMIT in March, Gregory Robinson (pictured above), the Founder & Managing Partner for Search & Advisory at Blenheim Partners noted that many high-level executives would be willing to take a lower income to work with organisations with purpose.
“It presents an opportunity to pursue a career for those seeking purpose,” he concluded.
It is – as they say – a one-sided playing field.
Subscribe to read the full story in this week’s issue of SATURDAY, in your inbox at 6am, Saturday 28 August.
