This article is from the Australian Property Journal archive
PROPERTY giant Lendlease will fight a $112 million tax bill handed down from the Australian Taxation Office (ATO) following an audit of the partial sale of its retirement business in 2017.
Lendlease sold a 25% stake in the $1.8 billion business to Dutch pension fund manager APG Asset Management N.V. It sold down further stakes totalling 50% to Aware Super in 2021 and 2022, prompting concerns there could be more tax bill pain on the way.
The ATO’s position is that certain liabilities assumed by Lendlease in the 2017 deal should be excluded from the tax cost base when calculating the gain.
The ATO attributed $62.4 million of the bill to capital gains tax, which Lendlease said was “a one-off event that only applies to the 2018 transaction”, a further $25.2 million additional tax from the sale of 25% of the units in the joint venture trust, and another $24.5 million of interest.
“Lendlease is confident of its position and will dispute the amended assessment,” the company said in an ASX statement yesterday.
“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. 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 adjustments do not relate to deductions claimed by Lendlease.
“Should the ATO apply the same treatment to both these partial sales we estimate this may give rise to additional tax of approximately $50 million, excluding any interest,” Lendlease said.
“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.”
Lendlease shares fell from $6.28 to as low $6.03 during trading yesterday after the announcement, before closing at $6.10, down 2.87%.
Lendlease has an investor day planned for 27th May. After years of soft results – including a downgrade to this year’s full-year result – it has been facing heated criticism from a number of key shareholders.
Among those have been John Wylie’s Tanarra Capital, which sent a letter to Lendlease chairman Michael Ullmer and CEO Tony Lombardo last month that criticised the company’s “arrogant” culture and argued that its international business should be jettisoned.
“There is simply too many people and not enough role accountability. Much of this flows from the overextended global business model the company has pursued,” the letter read.
