Not too quick: Tax Office dithering on Lendlease scam puts whistleblowers at risk

by Michael West | Aug 14, 2023 | Finance & Tax, Latest Posts

If Lendlease tax whistleblower goes down in court while the Tax Office continues to dither for more than four years enforcing its ‘double dipping’ rules against the property giant, the question could well be asked, why would anybody do the right thing and blow the whistle again? Michael West reports.

If there were any further proof required that, to bastardise the words of George Orwell, all animals are equal in the taxation zoo, but some animals are less equal than others, look no further than Lendlease. Oh, and its advisers PwC.

The Tax Office has been dithering for 5 years over Lendlease’s 2018 tax return but try being a small business, a non-multinational, failing to get your return in by October for the year to June 2023 … and see how you go.

In fact, this writer is just in receipt of a warning that wages reporting now has to be filed monthly, rather than quarterly, thereby catapulting that compliance workload by a factor of three times. Mind you, it might be a sensible cashflow initiative nonetheless, but you get the picture, there is one rule for the powerful and another for the rest of us.

To get to the point, the man who blew the whistle to the ATO on Lendlease’s $1b ‘double-dipping’ scheme now has his house on the line fighting under the flawed whistleblower protection laws in the courts. He awaits judgement in a game where he is personally funding his case, and our superannuation is funding the corporate defence.

Everything to play for: whistleblower’s home on the line as Lendlease makes merry with tax code

The key questions here are, one, will anybody ever do the right thing and blow the whistle on dodgy practices to any regulator again if Watson loses his house. His whistleblowing counterpart Richard Boyle is in an even worse predicament, fighting potential jail time in the courts.

Two, what the heck is the delay all about?

Lendlease carried out its double-dipping scheme from 1 July 2012 to 30 June 2015. 

They improperly included deductible amounts in the cost base of the retirement villages it bought in that period, thereby overstating the cost base of its villages by an estimated $1b.

It later sold 25% of its interest in those villages in November 2017. The gain on that sale reported by Lendlease in its 2018 tax return was understated because Lendlease was overstating its cost base. 

Lendlease lodged that return in April 2019.  The ATO had already been advised of what was Lendlease had done, so the ATO knew what to check.

Finally Lendlease disclosure … then not a peep

Lendlease first disclosed that the gain it disclosed was under audit from the ATO in August 2021. The 2022 and 2023 Lendlease Tax Reports (the latter released today) disclose that the ATO audit remains ongoing. (Lendlease incidentally has begun to pay some tax in this country after many years of paying zip – the report shows $66m payable on total income of $5.6b and taxable income of $290m, assisted by claiming both foreign and R&D tax credits). 

The relevant Lendlease tax return was lodged nearly four and a half years ago. We first broke the story here five years ago.

Lend Lease: double dipping and Dutch tripping

Why is it taking so long? We have asked again and will update this story when there is a response.

Lendlease has since sold another 50% of its interests, so more and more tax which is owed to us is not being collected by the ATO’s inertia.

Lendlease has been audited by KPMG since Lendlease listed, more than 60 years ago, so it is not surprising that KPMG didn’t require any note in the accounts to the effect that the ATO audit that would result in Lendlease owing $300m plus interest and penalties to the ATO. 

Anatomy of a Cover-Up: whistleblower warned PwC and Lendlease of $1b tax scam

Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

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