LendLease time to fess up

by | Aug 24, 2018 | Despatch

The 2018 Tax Report of LendLease is out. It confirms the construction juggernaut has effectively paid no tax in Australia yet again, although it did pay income tax, again, overseas.

There is no mention of its retirement village accounting which is under investigation by the Tax Office, as revealed here.

For 2018, the group paid just $2.8 million corporate income tax in Australia and $29.8 million offshore. Over the past decade, LendLease’s tax payments in Australia have amounted to a fraction of what it has paid in foreign countries. One of the major reasons for this is the aggressive, arguably illegal, tax treatment of tax deductions in its retirement village operations.

Lend Lease: double dipping and Dutch tripping

There is an interesting wording change from last year’s tax report. After noting a primary focus is to minimise the risk of sustainable different views between the group and the Tax Office, the 2018 Report says: this is achieved through “open engagement” with revenue authorities, engagement of reputable tax advisers who provide an opinion and strong internal controls to identify and mitigate tax risk.

Last year that sentence read: “This is achieved through open engagement with revenue authorities, engagement of reputable tax advisers who provide a high level of opinion and strong internal controls to identify tax risk”.

Now “mitigating” – was “identifying”.

In January 2018, non-executive directors Philip Coffey and Jane Hemstritch were appointed as members of the Risk Management and Audit Committee. This LendLease committee is chaired by David Craig, who was CFO at the Commonwealth Bank until June 30, 2017. At CBA, David Craig was responsible for leading the finance, treasury, property, security, audit and investor relation teams. In its 2018 annual report, CBA said, “The Board forfeited all unvested LTVR [Long Term Variable Remuneration] awards for David Craig and Alden Toevs reflecting collective and individual accountability for the APRA Prudential Inquiry Report findings.”

Meanwhile, the ATO is still finalising its revision of Tax Ruling 2002/14 which applies to the group’s booking tax benefits to profit rather than treating them as a timing advantage.

LendLease claims its financial statements are correct because the tax law doesn’t reduce the cost base of its retirement villages by the deductions claimed. If the ATO is right, the group may have to restate its financial statements for a number of years, perhaps to the tune of $300 million on up to $1 billion in questionable deductions.

For LendLease, the question is now whether it will be compelled to testify before the Senate Aged Care Inquiry as to its retirement village tax treatment. The group was the biggest winner from the latest round of aged care places.

Response to Senate Aged Care Inquiry Question on Notice re Lendlease

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Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences.

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