‘More pain to come’ after $112m Lendlease tax bill

Lendlease is set to make an announcement on Monday concerning a tax bill from the ATO, as a whistleblower says the company was cautioned about its accounts.

Lendlease chief executive Tony Lombardo. Picture: John Feder

Former Greenwoods & Herbert Smith Freehills tax partner and Lendlease whistleblower Anthony Watson has warned the construction giant will face the consequences of its tax structuring after it received a $112m bill.

The construction giant is expected to make an announcement to the market on Monday morning, after receiving an amended tax assessment on Friday, following a long-running review of Lendlease’s tax treatment of the sale of stakes in its retirement village ­operation.

Sources say they expect Lendlease to face further tax bills exceeding $300m, with the fate of several other asset sales in ­question.

Mr Watson, who is in a court battle with his former employer over his whistleblowing related to Lendlease’s tax plans, said several senior figures from the company could find themselves embroiled in the scandal.

In documents lodged with the court, Mr Watson alleges Stockland boss and former Lendlease CFO Tarun Gupta, and former Crown chief Steve McCann, were both warned about the tax treatment but failed to act.

The former tax partner claims he also cautioned Lendlease’s former chair David Crawford and current chair Michael Ulmer about the accounts but the company failed to act.

“It need not have come to this,” Mr Watson said. “They should have fixed it way before they lodged the tax return; they needn’t have lodged the false tax return.”

At issue is Lendlease’s tax treatment of its retirement living assets, which the company progressively sold down over three deals to Dutch pension fund APG Asset Management and Aware Super.

This followed Lendlease’s $192m takeover of the Primelife retirement business.

Lendlease’s tax bill could climb higher after the ATO was handed whistleblower reports concerning its tax treatment of the Sydney International Convention, Exhibition and Entertainment Precinct (SICEEP).

Former Lendlease CEO Steve McCann. Picture: Britta Campion

Former Greenwoods & Herbert Smith Freehills partner Anthony Watson.

An ATO spokeswoman said it could not comment “on the tax affairs of any individual or entity due to our obligations of confidentiality and privacy under the law”.

Mr Watson alleges in court claims that Lendlease engaged in an “improper tax dodge” at the ­SICEEP.

“They chose to be belligerent and tell me I didn’t know what I was talking about,” he said.

Lendlease relied on tax advice from PwC Australia to structure the sales, and on KPMG Australia for its audit services.

Sources have characterised PwC’s advice as aggressive, noting the firm had made headlines for other tax schemes it promoted to clients.

Lendlease had previously disclosed it was facing an tax office audit over its treatment of several assets, but sought to assure shareholders its situation was “like all large taxpayers in Australia”.

“Under this program, the ATO is seeking to obtain assurance that large corporates are paying the right amount of tax in accordance with tax laws,” it said.

It has also previously said Mr Watson “did not provide tax advice to Lendlease on the partial sale of our retirement living business” and it “undertook a full review of our tax and accounting position using external advisers not previously involved with the matter” after a meeting between the Greenwoods partner and Lendlease’s board and leadership.

“We believe our tax treatment is consistent with the ATO’s current guidance on the taxation of the retirement living industry,” the company said in 2021.

However, in February Lendlease added a contingent liability in its accounts, warning shareholders of a potential tax penalty from its retirement village sales.

Mr Watson said Lendlease would now pay the price of moves which saw it book major accounting benefits in 2013, 2014, and 2015. Between June 2013 and March 2015 Lendlease shares surged almost 98 per cent from $8.40 to $16.64. “What you are seeing now is all that is being reversed,” Mr Watson said.

Originally published as ‘More pain to come’ after $112m Lendlease tax bill