Federal Court orders a Greensill family trust must pay tax on $58m paid to Lex Greensill

A major court ruling has added a hefty bill to embattled Bundaberg business baron Lex Greensill woes that extend to his family’s empire.

Lex Greensill in London last year. Picture: Annabel Moeller

Living in London has proved costly for embattled business baron Lex Greensill with his family’s Bundaberg empire ordered to pay tax on $58m paid to Lex via a family trust.

Greensill Capital, which grew into an international financial firm, went into administration in March with billion-dollar debts.

However, it was the sale of shares of Greensill Capital years before from the family trust, headed by brother Peter, that attracted the attention of the Australian Tax Office.

The Peter Greensill Family Trust sold shares in the company between 2015 and 2017 and paid 100 per cent of the gains — $58 million — to London-based Lex, who tried to argue that classed him as a foreign resident.

The ATO ordered tax be paid on the gains, and a long legal battle ensued ending with a full bench of the Federal Court on Thursday ruling against the Bundaberg family’s attempts to avoid paying tax on the $58m of capital gains.

It leaves the Greensill trust and Lex Greensill with two options, either to appeal the decision to the High Court, or pay the tax.

Greensill Capital’s former office in London. Source:Annabel Moeller

Almost $33m of the income in question in the case arose from shares in Greensill Capital held by the trust sold between 2015 and 2017.

The gains from the sale were paid to Mr Greensill, on top of another $25m in stock that was transferred to him.

At the time Mr Greensill had suggested the $25m in shares were intended to be gifted to employees.

However, that stock is now worthless after the spectacular implosion of the business empire in March.

The defeat of the Greensill family’s tax battle, which includes it being ordered to pay court costs, threatens future payments to Mr Greensill from the family trust, which controls much of the family’s farming interests in Queensland.

Greensill Farming Group announce the start of construction for Green Solutions Wide Bay with the official 'ground-breaking' of the site.

The family trust has been intimately captured in the collapse of Greensill Capital, seeking along with several other creditors to get a slice of the assets of the business empire as administrators carve it up.

The Rich Lister, who recently dropped $3.5m on renovations to his three-storey house in Saughall, a small village in the English countryside, now faces further challenges to his income stream.

The landmark ruling raises significant issues for other non-resident beneficiaries of trusts, leaving them open to capital gains tax on distributions to non residents, even if those gains related to assets which were not taxable Australian property.

Court documents reveal Greensill Capital had received a $US60m in loans from the family trust in October 2020, guaranteed by the UK business.

The Greensill family trust is also deeply wrapped up in the family’s farming businesses around Bundaberg in Central Queensland.

Until December 2014 Greensill Farming was owned by the Australian parent company, Greensill Capital before being transferred to the trust.

The trust holding of the farming business has kept it out of the whirlwind wind-up that has claimed Greensill’s entities.

The farming company, as a trustee, has shelled out almost $70m since 2016 snapping up farms around Bundaberg.

In a statement the ATO said it welcomed the decision of the court.

“The Court’s judgment clarifies issues around capital gains assessed to the trustee of a resident trust, where the trustee makes a non-resident beneficiary entitled to these gains,” it said.

Originally published as Federal Court orders a Greensill family trust must pay tax on $58m paid to Lex Greensill