Lendlease Australia responds: to ABC 7.30 reporting
- 14 Aug 2023
Tonight, the ABC’s 7.30 program broadcast a story about Lendlease’s tax treatment for our Australian retirement living business.
In the interest of transparency, we’ve published our full responses to the program below.
In summary, we’re confident our tax treatment is consistent with the law and with the ATO’s 2002 tax ruling on the retirement living industry. We previously disclosed that the ATO was conducting an audit of the retirement living transaction in our Lendlease Tax Report 2021 (page 5) and Lendlease Tax Report 2022 (page 5), and most recently in our Lendlease Tax Report 2023 (page 4).
We’re now awaiting the outcome of the audit.
Our responses to the ABC
Q: KPMG has been Lendlease’s auditor for more than 65 years. This is not perceived as good governance. Does Lendlease think it is appropriate to have the same auditor for more than 60 years? If so, can you explain the rationale?
A: During the period in which KPMG has been Lendlease’s auditor, we’ve periodically conducted robust audit tender processes. At the conclusion of our 2013 audit tender process, it was determined that of the small number of accounting firms with the capacity and experience to manage our audit, KPMG had the strongest credentials and commercial insights.
In August 2022, the Lendlease Board announced it would conduct an audit tender process during FY23 in accordance with the Group’s Audit Committee Charter (Lendlease 2022 Annual Report page 74). In May 2023, we paused this process with the intent for it to be resumed at a later date. This was reported in the AFR here.
Q: A former tax partner Tony Watson alleges Lendlease doubled dipped on tax deductions in relation to retirement villages of up to $300 million. The ATO is auditing this transaction. Has Lendlease included this as a contingent liability? Where in the annual report is this audit by the ATO mentioned?
A: We’re confident our tax treatment is consistent with the law and with the ATO’s 2002 tax ruling on the retirement living industry. We disclosed that the ATO was conducting an audit of the retirement living transaction in both our Lendlease 2021 Tax Report (page 5) and our Lendlease 2022 Tax Report (page 5). We’re still awaiting the outcome of the audit.
Q: Lendlease hired PwC to look at its treatment of tax on retirement villages. Why?
A: In 2017, Lendlease sought advice from PwC on the tax treatment relating to our retirement living business. It’s not uncommon for companies such as ours to seek such relevant, independent advice.
Q: How much did Lendlease pay PwC for its consulting since 2012?
A: Like most companies, we don’t disclose our contractual arrangements with suppliers.
Q: Lendlease requested Tony Watson be removed as lead partner on the account to Lendlease after more than 30 years of advising. Why? Did it relate to his rejection of its treatment of the double tax deductions on the retirement villages?
A: The issues raised in this question are the subject of legal proceedings in the Federal Court. Therefore, we can’t specifically comment. However, we deny the allegations and will vigorously defend the proceeding.
Q: Does Lendlease stand by the double tax deductions?
A: We’re confident our tax treatment is consistent with the law and with the ATO’s 2002 tax ruling on the retirement living industry. In April 2018, we proactively contacted the ATO to review the transaction in question. This was almost one year prior to us submitting our 2018 tax return. Following Mr Watson contacting Lendlease, which was after the transaction was completed, we undertook a full review of the matter with an external adviser not previously involved in the matter.
Q: Lendlease has its head office in the same building as KPMG. Does KPMG pay rent into a Lendlease related fund? If so, can you explain the details? Is this a conflict?
A: Through our global investment management business, we lease commercial space to more than 3,400 organisations from large corporations to individual retail stores. Our occupancy agreements are all underpinned by competitive commercial terms.
Q: Your former chairman David Crawford was a former partner of KPMG. Did he receive an annuity from KPMG while he was a director of Lendlease?
A: This question should be directed to KPMG.
Q: Can you give an explanation why you are denying Mr Watson access to whistleblower protections under the current act?
A: We’re not denying Mr Watson whistleblower protections. The full Federal Court is currently deciding which whistleblower protections apply to his allegations.
Q: Do you have any idea when the ATO will finalise its audit?
A: We’re continuing to engage with the ATO on its audit.