This article is from the Australian Property Journal archive
UNDER-pressure property giant Lendlease is digging in its heels over the $112 million bill slapped down last week by the Australian Taxation Office, as plenty of noise surrounds the future of chairman Michael Ullmer.
The company has been facing heated criticism from a number key shareholders after a string of soft results and returns, and a downgrade to this year’s full-year result.
On its quest to simplify its business as part of a turnaround, Lendlease on Friday announced a $147 million agreement with Warburg Pincus to establish a 50/50 joint venture focussed on the growing life sciences real estate sector in the Asia Pacific.
Among the most vocal critics has been John Wylie’s Tanarra Capital, which called for “urgent board renewal” in 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.
Ullmer has been tipped to step down at the Lendlease investor day planned for 27th May. He is on the board of Westpac and over his career has been a KPMG partner, deputy CEO and board member of National Australia Bank, and a director at Woolworths and Foster’s Group.
Meanwhile, Lendlease told the ASX it intends to “request remission of the interest in full” regarding the $112.1 million tax bill confirmed last week, “based on the ATO’s previous written undertaking (5 February 2020) that no interest or penalties would be applied to the 2018 financial year”.
The bill concerns Lendlease’s sale of a 25% stake in the $1.8 billion business to Dutch pension fund manager APG Asset Management N.V.
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 said it calculated the gain on sale by including the value of liabilities for which it 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 company 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.
“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,” it reiterated.
“Lendlease is confident of its position and will dispute the amended assessment.”
