Lendlease hit with $112m tax bill
The ATO has issued the construction company with an amended assessment following allegations raised by a whistleblower.
Lendlease has announced it will dispute an amended assessment issued by the ATO relating to the partial sale of the Retirement Living business in the 2018 financial year.
In an ASX statement issued yesterday, Lendlease confirmed that the ATO had issued the company a statement of audit position and an amended income tax assessment for $112.1 million.
It follows allegations by a whistleblower that the company had incorrectly claimed hundreds of millions of dollars in tax deductions.
The amended assessment issued to Lendlease comprised of:
• $62.4 million capital gains tax arising from the exit of the Retirement Living trust from the Lendlease tax consolidated group which was a one-off event that only applies to the 2018 transaction.
• $25.2 million additional tax from the sale of 25 per cent of the units in the joint venture trust.
• $24.5 million of interest.
Lendlease said it intends to request remission of the interest in full based on the ATO’s previous written undertaking on 5 February 2020 and that no interest or penalties would be applied to the 2018 financial year.
“Lendlease calculated the gain on sale by including the value of liabilities for which Lendlease assumed the responsibility for at the time of the purchase of the relevant assets in its tax cost base,” the company said.
“Lendlease considers this to be in accordance with the law and consistent with the ATO’s tax ruling on the retirement living industry.
“The ATO’s position now is that certain liabilities assumed by Lendlease should be excluded from the tax cost base when calculating the gain. The ATO adjustments do not relate to deductions claimed by Lendlease.”
Since the partial sale of the Retirement Living business in 2018, Lendlease has sold down two further tranches of the units in the joint venture trust in the 2021 and 2022 financial years, totalling 50 per cent.
The construction company noted that the ATO had not yet issued amended assessments considering those subsequent sales.
“Should the ATO apply the same treatment to both these partial sales we estimate this may give rise to an additional tax of approximately $50 million, excluding any interest,” said Lendlease.
“Lendlease proactively contacted the ATO to review the tax treatment applied to the 2018 sale eight months prior to submitting its tax return and also obtained independent advice before lodgement.”
The company said it is confident of its position and will dispute the amended assessment.
A former partner at PwC-owned tax advisory firm, Greenwoods & Herbert Smith Freehills (GHSF), Anthony Watson, previously raised concerns that the construction giant had been allegedly “double-dipping” over its tax claims on a $1.7 billion purchase of retirement villages. Lendlease was the largest partner of GHSF.
After losing the Lendlease account and then being terminated by GHSF, Watson took his concerns to company officials and a global tax partner at PwC. In one email he said: “the ATO will not fall for it!”
In 2021, Lendlease had informed its investors it was being audited due to its retirement village tax treatment.
In February this year, Lendlease made another statement stating the audit of “the 2018 partial sale of the Retirement Living business” was ongoing.
Lendlease denied Watson’s allegations, adding: “We’re confident our tax treatment is consistent with the law and with the ATO’s 2002 tax ruling on the retirement living industry. We lodged our 2018 tax return on that basis and intend to vigorously defend our position, should the ATO not accept it.”
