Mark Carnegie wanted a $13 million tax break, so he sued his ex-wife

In an unsavoury court case, venture capitalist and philanthropist Mark Carnegie has successfully sued his former wife to release $35.4 million from their family trust, to take advantage of a $13 million tax exemption available to him through his residency in New Zealand.

Carnegie, 61, moved to New Zealand in January 2020, with his then partner Lady Katie Percy, a gunsmith and mechanic, who is the daughter of Britain’s 12th Duke of Northumberland. Her parents own Alnwick Castle, which doubles as Hogwarts in the Harry Potter films.

Carnegie and Percy settled in the town of Takaka on New Zealand’s South Island, but it was reported their relationship didn’t survive the pandemic.

The move to New Zealand was described by Carnegie as a shift into semi-retirement. It also made him eligible for a tax break. NSW Supreme Court Justice Michael Elkaim explained the tax break this month as a “transitional residency exemption … on any foreign income received by him for a period of up to four years from his arrival”. The expiration of that tax exemption is next January.

During the pandemic, Carnegie and his ex-wife Tanya Nelson Carnegie signed a document, which was drawn up by Glen Frost, a partner in PwC’s family office team, which outlined the terms of an agreement that included permitting Carnegie to request distributions from the family trust.

Carnegie and his former wife, with whom he has three children, separated in 2008, after 18 years of marriage. However, after the split they retained an equal share in company M&T Carnegie, which is the trustee for the Mark and Tanya Carnegie family trust.

M&T Carnegie also owns shares in Overby Stallings Holdings, which in turn owns shares in C.F. Group Investments.

It was June 2021 when that document was signed by Carnegie and his former wife, agreeing to a three-step process. That same day, the first and second steps were completed.

By January 2022, Carnegie requested the third step: a distribution from the family trust of $35.4 million. The distributions from the family trust were funded from “foreign income” from Overby.

But Carnegie’s former wife failed to co-operate, and the court case ensued this year to enforce the third step of the document, known as a term sheet.

This month, Justice Elkaim made orders in favour of Carnegie, after determining that Nelson Carnegie was aware of the legal proceedings, but had failed to take part or be legally represented. The judge noted that this was “envisaged” by Carnegie.

Carnegie declined to comment and said it was a “deeply private matter”.

Nelson Carnegie was contacted for comment but did not respond. Her nominated alternative director for the companies she shares with her ex-husband is Jacqueline Clarke. Clarke also declined to comment.

Justice Elkaim said in making his orders in favour of Carnegie he was satisfied he was not sanctioning any form of tax avoidance. “… but no doubt the ATO [Australian Tax Office] will take such measures as it thinks appropriate should it have a different view.”

An affidavit to the proceedings, signed by Carolyn Sutton, a director of Carnegie’s companies, was sealed by the judge as it contained details of discussions that had occurred with the ATO in relation to the income received from Overby from a foreign source.

Justice Elkaim considered whether Carnegie could have sued his ex-wife for damages for a breach of contract. “The difficulty with this approach is that the time necessary to bring such an action to fruition would necessarily involve the plaintiff being denied the tax exemption available under New Zealand law.”

The court was told the tax exemption is worth $13 million.

Instead, the judge made orders that if Nelson Carnegie failed to sign the distribution documents within seven days, the registrar of the court would sign them on her behalf.

The judge also ordered that Nelson Carnegie pay her ex-husband’s legal costs. “Having regard to the apparent disinterest of the defendant in the proceedings, and in performing her part of the term sheet, I think this is an appropriate order.”

Global roaming

Mark Carnegie is the eldest son of Rod Carnegie, who once helmed CRA before it became part of Rio Tinto.

He has worked for most of his life in finance and made his name when he sold the investment bank he co-founded, Carnegie Wylie, in 2007.

Carnegie Wylie was sold for more than $200 million to New York advisory house Lazard. The timing was fortuitous. A year later, the global financial crisis roiled markets and felled much bigger investment banks such as Lehman Brothers and Bear Stearns.

Carnegie’s investment in Carnegie Wylie was held through M&T Carnegie.

Since selling the investment bank, Carnegie’s gone on to make more money, including through property investments in pubs with Gerry Harvey and John Singleton, although he and Singleton have since fallen out.

Another of his property investments was the Christian Science temple he’d bought for $8.75 million in 2010 in Darlinghurst in east Sydney, and turned into a home. It was sold in 2020 for more than $20 million. Before selling it, Carnegie held a raucous Great Gatsby-themed farewell bash, ahead of his move to New Zealand.

It was reported that the party drew a who’s who of corporate Australia, including millionaires and billionaires, who rubbed shoulders with snake-handling waiters and burlesque dancers in champagne coupes.

Carnegie emerged from his semi-retirement in 2021 to run some of his businesses out of Singapore.

His M.H. Carnegie & Co website includes an article from the Financial Standard’s Private Wealth, which is a journal about family office investment.

In that article from late 2021, it’s stated that M.H. Carnegie & Co manages more than $900 million across eight platforms, including investing in venture capital, private equity, real estate debt and cryptocurrency.

Since then, Carnegie has confirmed he had cryptocurrency investments in companies that have collapsed, such as Sam Bankman Fried’s FTX and Do Kwon’s Terraform Labs that had the cryptocurrency Luna.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

An earlier version of this article incorrectly referred to the “late” Rod Carnegie. This masthead apologises to Mr Carnegie and his family for the error.