Maria purchased 1,000 Wesfarmers shares in December 1986. 23. Create your myGov account and link it to the ATO, Help and support to lodge your tax return, Occupation and industry specific income and work-related expenses, Residential rental properties and holiday homes, Instalment notices for GST and PAYG instalments, Your obligations to workers and independent contractors, Encouraging NFP participation in the tax system, Australian Charities and Not-for-profits Commission, Departing Australia Superannuation Payment, Small Business Superannuation Clearing House, Annual report and other reporting to Parliament, Complying with procurement policy and legislation, Wesfarmers Group Limited (Wesfarmers) return of capital. Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the return of capital. Wesfarmers has consistently maintained a high dividend payout ratio, with an average payout ratio of approximately 90% since 2009, and has also paid special dividends where it has disposed of assets. As a result, you will, in those circumstances, make a capital gain equal to the capital proceeds, being $2.00 per Wesfarmers share owned at the Record Date. Having regard to Wesfarmers strong balance sheet and cash flow generation, together with its wellestablished funding sources and robust credit metrics, the Board was of the opinion that, consistent with Wesfarmers growth strategy, Wesfarmers was able to undertake the return of capital without materially prejudicing its ability to fund new investments, or to take advantage of value accretive opportunities, if they arise. Demerger tax relief gives certain Wesfarmers shareholders the choice to defer the Australian capital gains tax (CGT) consequences that arise as a result of a Wesfarmers shareholder receiving Coles shares under the demerger. ITAA 1997 995-1(1) On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. In addition to the return of capital, Wesfarmers proposes to undertake a share consolidation of approximately 1 to 0.9876. Wesfarmers Chemicals, Energy and Fertilisers, People development, diversity and inclusion, Chairman and Managing Director's 2022 sustainability message, Bunnings collaborates with Indigenous artists through exclusive plant pots range, Bunnings support for flood affected communities, Bunnings launches national battery recycling programs, Bunnings expands fleet with all electric trucks, Information for participants of the Wesfarmers employee share plans. 54. Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. 37. Wesfarmers Limited was founded in 1914 and is headquartered in Perth, Australia. ITAA 1997 975-300(3) The discount factor for resident individuals and trusts is one-half and for complying superannuation funds is one-third. 30. Wesfarmers' return of capital will be recorded as a debit to the share capital account and Wesfarmers shareholders will receive a distribution of share capital to the value of $0.50 per share. The capital loss is equal to the amount of the difference (subsection 104-25(3)). ITAA 1936 45C(2) The capital return has been approved by the shareholders. Income tax: Capital management distribution: Wesfarmers Limited . If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice. On 3November 2003 Wesfarmers Limited announced a return of capital ('capital return'). ato class ruling wesfarmers return of capital. Wesfarmers has confirmed that its share capital account (as defined in section 975-300 of the ITAA 1997) is not tainted (within the meaning of Division 197 of the ITAA 1997). This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. 19. 19. 21. ITAA 1936 44(1) Therefore, Wesfarmers shareholders will obtain a tax benefit from the return of capital. On 27 August 2021, Wesfarmers announced that it will return share capital to Wesfarmers shareholders of $2.00 per Wesfarmers share totalling $2.3 billion (return of capital). Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. 82. * If you choose to index the cost base of shares you acquired before 21September 1999, you cannot apply the CGT discount when you dispose of them. In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. To be eligible to receive the return of capital, you needed to be a registered shareholder on the record date for determining entitlements, which was 4.00pm (Perth time) on Friday, 19 November 2021. Wesfarmers primary objective is to deliver satisfactory returns to shareholders through financial discipline and strong management of a diversified portfolio of businesses. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. 39. What are the capital gains tax consequences for me? ITAA 1997 Div 110 You will make a capital gain under CGT event C2 if the capital proceeds from the ending of the right are more than the cost base of the right. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. No part of the return of capital paid to you by Wesfarmers on the Payment Date is a dividend as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). 58. 49. Section 45A - streaming of dividends and capital benefits. 40. Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. 20. The right to receive the payment (being an intangible CGT asset) will end by the right being discharged or satisfied when the payment is made. You calculate your capital gain using the: Indexed cost base or discount method, whichever gives you the better result*, On or after 21 September 1999 and before 15December 2002, Discount method (after applying any capital losses - including unapplied capital losses from previous years). Mark purchased 200 Wesfarmers shares in December 2000. A Wesfarmers shareholder will make a capital gain if the amount of the return of capital ($0.50 per fully paid share) is more than the cost base of the Wesfarmers share (subsection 104-135(3) of the ITAA 1997). The following is a detailed contents list for this Ruling: 21. Although a 'capital benefit' (as defined in paragraph 45A(3)(b)) will be provided to participating Wesfarmers shareholders under the return of capital, the circumstances of the return of capital indicate that there will be no streaming of capital benefits to some shareholders and dividends to other shareholders. Ruling Return of capital is not a dividend 7. Wesfarmers has advised the total market value of its assets that are not taxable Australian real property is greater than the market value of its taxable Australian real property assets. In broad terms, section 45B of the ITAA 1936 applies where: 49. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. The term 'share capital account' is defined in section 975-300 as an account which the company keeps of its share capital, or any other account created on or after 1 July 1998 where the first amount credited to the account was an amount of share capital. Maria must reduce the cost base of her shares by $2,500 to $1,055.80. Section 45B applies where certain capital payments are made to shareholders in substitution for dividends. Division 230 does not apply to individuals unless they have made an election for it to apply. ITAA 1936 6(1) 14 December 2018 Demerger of Coles Group Limited - ATO Class Ruling The Australian Commissioner of Taxation has today issued Class Ruling CR 2018/59 (Class Ruling) covering the Australian income tax implications of the demerger of Coles Group Limited (Coles) for shareholders of Wesfarmers Limited (Wesfarmers).The Class Ruling confirms the availability of demerger tax relief for certain . The return of capital was announced on 27 August 2021 and was approved by shareholders at the Wesfarmers Annual General Meeting on 21 October 2021. . Eligible shareholders received 1 COL share for each WES share owned. No part of the return of capital to a Wesfarmers shareholder will be a dividend, nor included in a shareholder's assessable income. The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. The high dividend payout policy is intended to be maintained following the return of capital to shareholders. This is clearly marked. He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. The Class 76. 36. 35. ITAA 1997 115-25(1) CGT event C2 happened to your right to receive the return of capital on the Payment Date when Wesfarmers paid you a return of capital of $2.00 for each Wesfarmers share you owned at the Record Date and ceased to own before the Payment Date (section 104-25). Components of the capital return The capital return was $2.50 per share. ITAA 1997 104-165(3) The capital return was undertaken to return a portion of surplus capital equitably to shareholders and to ensure that Wesfarmers has a more efficient capital structure. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. You received 200 cents for every share you held as a registered holder on the record date of 4:00pm (Perth time) Friday, 19 November 2021. A Wesfarmers shareholder who is a foreign resident just before CGT event G1 happens, disregards any capital gain made when CGT event G1 happens if their shares in Wesfarmers are not 'taxable Australian property' (section 855-10 of the ITAA 1997). If the return of capital ($0.50 per fully paid share) is not more than the cost base of the Wesfarmers share at the Payment Date, the cost base and reduced cost base of the share will be reduced (but not below nil) by the amount of the return of capital (subsection 104-135(4) of the ITAA 1997). Therefore, you can treat a capital gain made when CGT event C2 happened to your right to the payment of the return of capital as a discount capital gain under Subdivision 115-A if you acquired your Wesfarmers share at least 12 months before the Payment Date (subsection 115-25(1)) provided the other conditions in Subdivision 115-A are satisfied. ITAA 1997 975-300 For more information about the tax implications of owning shares, see the following publications: For help applying this information to your own situation, phone us on 132861. 5. ITAA 1997 104-25 66. ITAA 1997 104-135(3) For Wesfarmers shares you acquired after 19September 1985* you must: * Shares acquired before 20 September 1985 are pre-CGT assets and you therefore disregard any capital gain or capital loss you make on them. The return of capital was announ 54. For those shareholders who are tax residents of Australia and hold their shares on capital account at the time the return of capital is paid, no part of the return of capital should be treated as a dividend for income tax purposes. The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. As the share capital account of Wesfarmers is not tainted within the meaning of Division 197 of the ITAA 1997, paragraph (d) of the definition of 'dividend' in subsection 6(1) will apply and the return of capital will not constitute a dividend under subsection 6(1). The summary in these documents and in this section is general in nature and should not be relied upon as advice. For shares that had reached a taxing point (i.e. Last date for trading in cum return of capital for shares. These included the divestment of Wesfarmers interest in the Bengalla coal mining joint venture, Curragh coal mine, Kmart Tyre & Auto, Quadrant Energy and 10.1 per cent of Wesfarmers post-demerger 15 per cent shareholding in Coles. ITAA 1997 Subdiv 115-A Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). 45. Sections 45A, 45B and 45C of the ITAA 1936 do not apply. 28. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Some of the information on this website applies to a specific financial year. The term 'dividend' is defined in subsection 6(1) of the ITAA 1936 and includes any distribution made by a company to any of its shareholders. The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. As discussed in paragraph 52 of this Ruling, the payment of the return of capital to Wesfarmers shareholders will be a capital benefit. 22. Shareholders were sent the payment advice for the return on capital payment by email or in hard copy on Thursday, 2 December 2021. ATO references: Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. The effect of such a determination is that all or part of the return of capital received by Wesfarmers shareholders is treated as an unfranked dividend paid by Wesfarmers out of profits. 1. The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. These included the divestment of Wesfarmers interest in the Bengalla coal mining joint venture, Curragh coal mine, Kmart Tyre & Auto, Quadrant Energy and 10.1 per cent of Wesfarmers post-demerger 15 per cent shareholding in Coles. return of capital on shares However paragraph (d) of the definition of dividend specifically excludes a distribution from the meaning of 'dividend' if the amount of the distribution is debited against an amount standing to the credit of the company's share capital account. The Class Ruling confirms the availability of demerger tax relief for certain Wesfarmers shareholders. If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. Using this method, Maria has made no capital gain on the return of capital, so she does not have to put anything on her 2003-04 tax return to reflect this event. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. If the amount of the return of capital of $2.00 per Wesfarmers share is not more than the cost base of your Wesfarmers share, the Cost base / reduced cost base of the share are reduced (but not below nil) by the amount of the return of capital (subsection 104-135(4)). Copyright Act 1968 The purpose which causes section 45B to apply may be the purpose of any party to the scheme. However, the list of relevant circumstances in subsection 45B(8) is not exhaustive and regard may be had to other circumstances on the basis of their relevance. 18. 24. This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. Shares may have traded at a lower price from the ex return of capital date than they otherwise would have done had the return of capital not occurred. Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. TR 2006/10 ITAA 1936 45B(8) 44. The Australian Taxation Office (ATO) has published a Class Ruling in relation to the taxation treatment of the $2.00 per share return of capital to Wesfarmers shareholders, which was paid on 2 December 2021. The cost base of the right does not include the cost base or reduced cost base of the share previously owned by you to the extent that it was applied in working out a capital gain or capital loss made when a CGT event happened to the share; for example, when you disposed of the share after the Record Date and before the Payment Date. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. Corporations Act 2001. Shares in Wesfarmers will be 'an indirect Australian real property interest' if (among other things) they pass the principal asset test in section 855-30. Australian Taxation Office for the Commonwealth of Australia. 59. 69. The return of capital was in addition to the interim dividend of 88 cents per Wesfarmers share paid on 31 March 2021 and a final dividend of 90 cents per share for the year ended 30 June 2021 paid by Wesfarmers on 7 October 2021. ITAA 1997 855-10(1) Australian Taxation Office (ATO) Class Ruling . 47. ITAA 1936 45A(3)(b) The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. 4. At Wesfarmers we believe sustainability is about understanding and managing the ways we impact the communities and environments in which we operate, to ensure that we continue to create value in the future. As the right to receive the payment of the return of capital was inherent in the Wesfarmers share during the time it was owned, the right is considered to have been acquired at the time when the share was acquired (section 109-5 of the ITAA 1997). 22. | August 8, 2022 We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. No part of the return of capital paid to you by Wesfarmers on the Payment Date is a dividend as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). ITAA 1936 47 The ATO ruling, if The return of capital will be paid equally to each holder of a Wesfarmers share (being ordinary shares and partially protected ordinary shares) who is registered on the Wesfarmers share register on the Record Date. If the return of capital of $2.00 per Wesfarmers share you received was not more than the cost base of the share, the Cost base / reduced cost base of each share is reduced by the amount of the return of capital (subsection 104-135(4)). 16. if the cost base (after any adjustment, as may be relevant, for any indexation, any previous return of capital or as a result of the Coles demerger) of a share acquired after 19 September 1985 is less than the return of capital amount (on a cents per share basis), then an immediate capital gain will arise for the difference. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. 13. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. A Wesfarmers shareholder will make a capital loss if the capital proceeds from the ending of the right are less than the reduced cost base of the right. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. Under subsection 855-10(1) of the ITAA 1997, an entity disregards a capital gain or capital loss from a CGT event if they are a foreign resident, or the trustee of a foreign trust for CGT purposes, just before the CGT event happens, and the CGT event happens in relation to a CGT asset that is not 'taxable Australian property'. In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. 8 December 2021. 55. The return of capital was considered and approved by shareholders at the 2021 AGM. Some of the information on this website applies to a specific financial year. 10. The distribution was entirely capital in nature. The question is whether it would be concluded that a person who entered into or carried out the scheme did so for the purpose of obtaining a tax benefit for the relevant taxpayer in respect of the capital benefit. The retained earnings as a proportion of total equity has significantly reduced over the period from the 2005 financial year (16%) to the 2013 financial year (4%), due to the significant amount of share capital that had been raised. ITAA 1997 855-10(1) It is anticipated that shareholder approval will be sought at Wesfarmers' Annual General Meeting (AGM) which is scheduled for 7 November 2013. What was the capital return?Wesfarmers made a cash payment to shareholders of 200cents per share (or approximately $2,268 million in total). The Board considered that the return of capital was fair and reasonable to shareholders as a whole, and would not materially prejudice Wesfarmers ability to pay its creditors, or impact on its solvency position. A Wesfarmers shareholder who is a foreign resident just before CGT event C2 happens, disregards any capital gain or capital loss made when CGT event C2 happens if their right to the return of capital is not 'taxable Australian property' (section 855-10 of the ITAA 1997). Return of capital is not a dividend for income tax purposes. 29. Therefore, if the cost base or reduced cost base of the share previously owned by you has been fully applied in working out a capital gain or capital loss on the share, the right to receive the return of capital will have a nil cost base. The return of capital was made possible by the Wesfarmers Groups continued strong cash flow generation and the receipt of approximately $4.3 billion in proceeds from the sales of a number of assets during FY2018 to FY2020. The ruling applies from 1 July 2021 to 30 June 2022. At 30 June 2007, Wesfarmers' share capital was $2,256 million, with retained earnings of $1,131 million (effectively $588 million after the final 2007 dividend of $543 million). ITAA 1936 45B(5) The distribution was entirely capital in nature with no dividend component. For participants in all other Australian employee share plans, the tax implications are as follows: For shares that had not reached their ESS deferred taxing point at the time of the return of capital payment (i.e. This is clearly marked. The return of capital was made possible by the Wesfarmers Groups continued strong cash flow generation and the receipt of approximately $4.3 billion in proceeds from the sales of a number of assets during FY2018 to FY2020. Wesfarmers provided separate information in relation to the tax implications of the return of capital payment for participants who were located within Hong Kong and India at the time of the capital return payment. ITAA 1997 977-50 33. The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. This amount represents your capital proceeds. A CGT event will not happen if a company converts its shares into a larger or smaller number of shares (the converted shares) in accordance with section 254H of the Corporations Act in that: While there is a change in the form of the original shares, there is no change in their beneficial ownership. For participants in the Australian tax exempt share plans or the loan plans the cost base for each share held on behalf of employees should be reduced by the return of capital amount. The last date to purchase shares that were eligible to receive the return of capital was Wednesday, 17 November 2021. This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . 3.7 Cash return of capital amount per +security AUD 2.00000000 Part 4 - Changes to option pricing as a result of the cash return of capital 4.1 Will the cash return of capital affect the exercise price of any +entity-issued options? Return of capital amount - $5.68 for each entitled WES share. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. ITAA 1997 855-10 Make sure you have the information for the right year before making decisions based on that information. 11. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. Broad terms, section 45B applies where: 49 tax Assessment Act 1997 unless otherwise indicated of diversified. 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