ato class ruling wesfarmers return of capital

Collectively, shareholders received a total distribution of approximately $1,143 million. 25. 20. ITAA 1997 977-50 8 December 2021. CGT event C2 happened when the return of capital was made. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. A Wesfarmers shareholder's right to the payment of the return of capital is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. Some of the information on this website applies to a specific financial year. If the scheme is not carried out as described, this Ruling cannot be relied upon. 29. 46. 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 return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. 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. 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). The return of capital will be affected by way of an equal reduction of capital under section 256B of the Corporations Act 2001 (Corporations Act), and requires shareholder approval by ordinary resolution under section 256C of the Corporations Act. During the years ended 30 June 2018 to 30 June 2020, Wesfarmers disposed of a number of assets and received sale proceeds totalling $4.3 billion. 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 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. Under with section 112-25 of the ITAA 1997, the consolidation of Wesfarmers shares will not result in a CGT event happening where the company converts its shares in accordance with section 254H of the Corporations Act. The following is a detailed contents list for this Ruling: 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). Expand Company Description ATO Class Ruling - return of capital to shareholders StockBot 357,511 posts about a year ago WES released this announcement to the ASX on 8 December 2021, 17:19. The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. Accordingly, the Commissioner will not make a determination under subsection 45A(2) of the ITAA 1936 that section 45C of the ITAA 1936 applies in relation to the whole, or a part, of the return of capital. ITAA 1997 104-25 10. The last date to purchase shares that were eligible to receive the return of capital was Wednesday, 17 November 2021. 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. Wesfarmers raised the following equity to reduce debt and provide balance sheet flexibility: 12. Please refer to the Wesfarmers Limited 2021 Shareholder Tax Information Guide or the ATO class ruling. For each of these shares, you have made a capital gain of: For shares with a cost base equal to or greater than $2.50, you have made no capital gain as a result of the return of capital. 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. Make sure you have the information for the right year before making decisions based on that information. ITAA 1997 Div 230 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 return of capital was not eligible to participate in the DIP. As Wesfarmers has a high dividend payout ratio and distributes, where possible, available franking credits, a return of capital was seen as the most efficient distribution of capital to shareholders. For the year ended 30 June 2013, Wesfarmers' retained earnings will be $2,375 million ($1,160 million post final dividend). * 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. To calculate your payment, multiply the number of shares held on the record date by $2.00 per share. In working out the capital gain or capital loss when CGT event C2 happens, the capital proceeds are equal to the amount of the return of capital ($2.00 per Wesfarmers share) (subsection 116-20(1)). 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)). Maria's capital gain is $200 ($2,500 - $2,300). In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. Neither Wesfarmers nor any of its officers, employees or advisors assumes any liability or responsibility for advising shareholders about the tax consequences of the return of capital. Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 63. For your other shares - reduce the cost base and reduced cost base by $2.50 each. This is due to the outflow of funds to shareholders. 57. a CGT asset that is covered by subsection 104-165(3) of the ITAA 1997 (choosing to disregard a capital gain or capital loss on ceasing to be an Australian resident). Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. The Class Ruling and further details regarding the return of capital can be accessed via the Investor Centre section of the Wesfarmers website at www.wesfarmers.com.au. No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). As such, paragraph (d) of the definition of 'dividend' in subsection 6(1) of the ITAA 1936 applies and the return of capital is not a dividend. 38. Some of the information on this website applies to a specific financial year. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. 75. Section 45B - scheme to provide capital benefits. This payment was: 55. ITAA 1997 104-165(3) It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. Income tax: Capital management distribution: Wesfarmers Limited . The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. adjust the cost base and reduced cost base of your Wesfarmers shares. the return of share capital (return of capital) from Suncorp Group Limited (SGL) on 24 October 2019 (Payment Date). 32. You made a capital gain when CGT event G1 happened if the return of capital of $2.00 per Wesfarmers share you received was more than the share's cost base (subsection 104-135(3)). ITAA 1997 116-20(1) 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. capital gains tax Wesfarmers has advised that, at the time CGT event G1 happens for any foreign resident Wesfarmers shareholder who is entitled to the return of capital, a Wesfarmers share will not be an indirect Australian real property interest (as defined in section 855-25 of the ITAA 1997). There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. 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). Accordingly, the Commissioner will not make a determination under subsection 45B(3) of the ITAA 1936 that section 45C of the ITAA 1936 applies in relation to the whole, or a part, of the return of capital. ITAA 1936 45B(2)(a) Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). Corporations Act 2001. 22. Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. ITAA 1997 104-135(4) The right to receive the return of capital, being an intangible asset, ended by the right being discharged or satisfied when the return of capital was made (section 104-25). ITAA 1997 109-5 The market value of Wesfarmers' assets that are taxable Australian real property within the meaning of section 855-20 is less than the market value of Wesfarmers' other assets for the purposes of section 855-30. 24. It is anticipated that the share consolidation will have no effect on the value of each shareholder's shares relative to the total market value of Wesfarmers. ITAA 1997 855-10(1) Maria received a total of $2,500 (1,000 x $2.50) in the return of capital. CGT event G1 happened on the Payment Date when Wesfarmers paid you the return of capital of $2.00 for each Wesfarmers share you owned at the Record Date and continued to own at the Payment Date (section 104-135). to make a short-term or 'one-off' commercial gain. 36. 36. This is clearly marked. Aussie supermarkets set to capitalise on high inflation, but softer demand ahead, WESFARMERS LIMITED : Ex-dividend day for interim dividend, Out of lockdown, Kmart pushes Australia's Wesfarmers to higher profit, Transcript : Wesfarmers Limited, H1 2023 Earnings Call, Feb 15, 2023, Wesfarmers Raises Dividend as Fiscal H1 Profit, Revenue Increase, Australian Stock Exchange - 12:10:24 2023-03-01 am EST. 12. The cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). 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). Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. By contrast, a dividend would generally be included in the assessable income of a resident shareholder or in the case of a foreign resident, be subject to dividend withholding tax under section 128B. The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. ITAA 1936 44(1) The capital loss is equal to the amount of the difference (subsection 104-25(3)). ITAA 1936 47 9. capital reductions CGT event C2 in section 104-25 of the ITAA 1997 will happen when Wesfarmers pays the return of capital to a Wesfarmers shareholder in respect of a Wesfarmers share that they own at the Record Date but which they cease to own before the Payment Date. In the event that the return of capital did represent a dividend rather than a capital benefit, it is likely that a Wesfarmers shareholder would incur a greater tax liability. 25. For more information on how to work out the cost base and the reduced cost base of shares, see the Guide to capital gains tax. This Ruling applies from 1 July 2021 to 30 June 2022. Please find below some information and frequently asked questions in relation to the 2021capital return. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 4:00pm (Perth time) Friday, 19 November 2021. 2. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10). Accordingly, no part of the return of capital will be taken to be a dividend for income tax purposes. Shareholders who did not provide the share registry with their bank account details, may complete a paper Direct Credit Payment Form, which is available from Wesfarmers share registry, Computershare Investor Services Pty Limited, or provide their details online to Computershare at www.computershare.com.au/easyupdate/wes. ITAA 1936 45B(5)(b) If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. Taxation Administration Act 1953. 29. 80. ITAA 1997 104-135(4) If Maria chooses the discount method, she calculates her capital gain by subtracting her cost base from the amount she received in the return of capital. Components of the capital return The capital return was $2.50 per share. Sections 45A and 45B of the ITAA 1936 are two anti-avoidance provisions which, if they apply, allow the Commissioner to make a determination that section 45C of the ITAA 1936 applies. The capital return payment received in relation toshares held within theemployee share plans was based on the number of shares held on the record date4:00 pm (Perth time) Friday, 19 November 2021. 23. Accordingly, the principal asset test in section 855-30 will not be satisfied. 13. 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. ITAA 1936 45B(2)(c) The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). 55. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 35. 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)). 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. Mark received a total of $500 (200 x $2.50) in the return of capital. In broad terms, section 45B of the ITAA 1936 applies where: 49. 21. Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. 43. Wesfarmers derived a net profit after tax of $1.335 billion from the disposal of the assets, which was paid to shareholders as special dividends in April 2019 and October 2020. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . ITAA 1997 104-25(3) 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). 16. Wesfarmers is an Australian-resident company listed on the Australian Securities Exchange since 1984. according to an ATO ruling. On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. This Ruling applies from 1 July 2013 to 30 June 2014. ITAA 1936 45B(3)(b) If a Wesfarmers shareholder makes a capital gain from CGT event G1 happening, the cost base and reduced cost base of the Wesfarmers share is reduced to nil. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 8 to 30 of this Ruling. ITAA 1936 45B(5) Australian Taxation Office for the Commonwealth of Australia. 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). 64. ITAA 1997 855-20 Wesfarmers expects that dividends will continue to be paid in the future on a regular and sustainable basis in line with its dividend policy. Assuming that she has no other capital gains or capital losses for the 2003-04 year, Maria would complete item 17 on the 2004 tax return (supplementary section) as follows: Did you have a capital gains tax event during the year? For those employee shareholders who hold their shares within an Australian Wesfarmers employee share plan, are tax residents of Australia, only work in Australia and hold their shares on capital account at the time the return of capital was paid, the tax implications of the return of capital are as follows: Following the payment date, Wesfarmers provided Australian participants with a statement that set out the taxation implications of the return of capital payment and where applicable information in relation to any cost base adjustments. Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. She must use the indexed cost base method in all future events affecting these shares. 54. The capital return was completed on 18December 2003. 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. 30. a capital payment (it was not classed as a dividend for any purpose and had no dividend component). 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. Note: The test of purpose is an objective one. A Wesfarmers share is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . It is anticipated that shareholder approval will be sought at the AGM scheduled for 7 November 2013. Make sure you have the information for the right year before making decisions based on that information. The return of capital satisfies the first two conditions. He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. Shareholders are sent return of capital payment advice. Wesfarmers primary objective is to deliver satisfactory returns to shareholders through financial discipline and strong management of a diversified portfolio of businesses. Foreign-resident shareholders able to disregard capital gains tax. 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? 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). In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. If you provided your direct credit payment instructions by 4:00pm (Perth time) on Friday, 19November2021, the return of capital payment was made on Thursday, 2 December 2021 by direct credit to your financial institution if your registered address is in Australia, New Zealand or the UK. Return of Capital Wesfarmers proposes to make a cash payment to shareholders of A$0.50 per ordinary share and partially protected share as a return of capital. 59. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. ITAA 1936 45B(8) Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. What are the capital gains tax consequences for me? Section 45B - schemes to provide capital benefits. 40. The assets disposed of were Wesfarmers' interests in Wesfarmers Bengalla Pty Ltd, Wesfarmers Curragh Pty Ltd, Tyre & Auto Pty Ltd and Quadrant Energy Holdings Pty Ltd, as well as 10.1% of Wesfarmers' 15% shareholding in Coles Group Limited. 42. 53. Since 2009, the dividend payout of Wesfarmers has been as follows: 14. 25. 45. However, paragraph (d) of the definition of dividend 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. 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. TAA 1953 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. The purpose which causes section 45B to apply may be the purpose of any party to the scheme. What are the shareholder tax implications of the capital return? 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. ITAA 1997 Div 115 If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take. After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). If you have a New Zealand bank account, the exchange rate that was used to convert the Australian dollar payment into New Zealand dollars was set on the record date. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. Did I have the choice to participate in the capital return? All registered shareholders on the record date received the capital return there was not an opportunity for these shareholders to 'opt out' of the capital return. ITAA 1936 45A(2) The cost base of a Wesfarmers shareholder's right to receive the return of capital is worked out under Division 110 of the ITAA 1997 (modified by Division 112 of the ITAA 1997). The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. 39. Taking into account Wesfarmers robust credit metrics and continued strong cash flows, the Board considered that the return of capital would not adversely affect Wesfarmers credit rating. There was no share consolidation as part of this capital management initiative and the number of Wesfarmers shares held by shareholders was not affected by the return of capital. The high dividend payout policy is intended to be maintained following the return of capital to shareholders. The only relevant category of taxable Australian property is table item 2 of section 855-15. 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. Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. ITAA 1997 975-300(3) ITAA 1936 45B(3) This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. You will make a capital gain from CGT event G1 happening if the amount of the return of capital of $2.00 per Wesfarmers share is more than the cost base of your Wesfarmers share. Under the return of capital, all shareholders were treated in the same manner. 70. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. . This is clearly marked. 15. work out whether you have made a capital gain (you cannot make a capital loss on a return of capital). 2. Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited, Personal investors guide to capital gains tax, Aboriginal and Torres Strait Islander people, you are an Australian resident for tax purposes, you held shares in Wesfarmers and received the return of capital in December2003, you did not acquire your shares under an employee share scheme, and. If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. Section 45A of the ITAA 1936 generally applies where: 45. The converted shares will have the same date of acquisition as the original shares to which they relate. ITAA 1936 44 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. 18. The table sets out these five categories of CGT assets: 77. The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. ITAA 1997 855-15 ITAA 1936 318 The return of capital was considered and approved by shareholders at the 2021 AGM. 56. For information on the different methods you can use to work out your capital gain, see the Guide to capital gains tax. share capital, Legislative References: Eligible shareholders received 1 COL share for each WES share owned. The discount factor for resident individuals is one-half. 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. As at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. 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). 7. The capital gain will be a discounted capital gain for shares allocated at least 12 months before the payment date of Thursday, 2 December 2021. 23. ITAA 1997 855-15 37. : Yes. 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 Record Date for the return of capital is expected to be on 15 November 2013. 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. Corporations Act 2001 256B Wesfarmers Limited (WES) - Demerger . ATO Class Ruling - return of capital to shareholders. The uplift factor is worked out by dividing 123.4 by the consumer price index for the December quarter of 1986 (79.8) and is 1.546 (rounded to three decimal places). Where the original shares were acquired on or after 20 September 1985, subsection 112-25(4) of the ITAA 1997 provides that each element of the cost base and reduced cost base of the converted shares is the sum of the corresponding elements of each original share.
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