Lendlease’s tax dispute could cost it at least $112m, but whistleblower Anthony Watson has lost his job, battled depression and is about to sell his family home.
In 2012, he had advised the property group against making alleged aggressive tax claims on its retirement living business.
Watson was so concerned about Lendlease’s tax accounting that he eventually wrote to the upper echelons of the property group. Crawford, a respected former KPMG auditor, arranged for Watson to meet Gupta and Lendlease director and audit committee head David Craig, a former chief financial officer at Commonwealth Bank of Australia and Australand.Lendlease announced that the Australian Taxation Office had issued it with a $112 million amended assessment following an intensive audit of its retirement living business.
“It’s vindication, but it has just taken so long for this to come out,” he says. “By the time you get there, you’re so exhausted from the trip that you don’t appreciate it as much.”The campaign has taken a deep personal toll on Watson. He lost his job at Greenwoods after becoming obsessed with the Lendlease matter and crossing a big client of the firm.
“In principle, an item of expenditure should either be deductible for income tax purposes or included in the cost base of an underlying asset for CGT purposes, but not both,” the ATO noted.After Lendlease director Michael Ullmer took over as chairman in late 2018, Watson received an email from him on November 25, 2019, confirming that the latter was aware of his meetings with Crawford, Craig and Gupta.
Through serial acquisitions, Lendlease ended up with thousands of retirement homes and grouped them in a retirement living trust. The homes were already being leased by existing retirees under the former village owners, who paid tax each year on the so-called “lease premiums”, much like landlords declare rent in their taxable income.Upon acquisition, Lendlease repaid the residents for the lease premiums they previously paid to the former owners.
“A subsequent meeting with senior leadership and a member of the board was also organised to further understand his point of view. But the tax benefits had already been baked into Lendlease’s accounts in 2013, 2014 and 2015, Watson says. The tax saving was booked to profit in those years, improving the company’s returns.“It is Tax 101 that you can’t claim an outgoing twice,” Watson says.
“Separate to the tax determination, the ATO has raised questions in relation to the tax treatment by Lendlease on the sale of our retirement living business. The Tax Institute withdrew its original submission to the ATO draft determination on the matter, amid concerns that Lendlease’s tax adviser, PwC, heavily influenced the institute’s stated position.
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