Accordingly, if the Wesfarmers share was acquired by the Wesfarmers shareholder at least 12 months before the return of capital was paid, a capital gain from CGT event C2 happening on the ending of the corresponding right may qualify as a discount capital gain under subsection 115-25(1) of the ITAA 1997, provided the other conditions in Division 115 of the ITAA 1997 are satisfied. Maria's indexed cost base is $3,555.80 ($2,300 x 1.546). ITAA 1997 Div 109-A The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. 68. 69. Who this Ruling applies to 4. The return of capital was not eligible to participate in the DIP. 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). 48. 46. To calculate your payment, multiply the number of shares held on the record date by $2.00 per share. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 66. 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. ITAA 1936 45C(1) 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 relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. 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. How do I adjust the cost base and reduced cost base of my Wesfarmers shares? Wesfarmers operates a diverse business which covers home improvement, office supplies, department stores and an industrials division with businesses in chemicals, energy and fertilisers, and industrial and safety products. 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. ITAA 1936 45B(3) ITAA 1997 855-30 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). No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). 60. 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. 47. 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. A Wesfarmers share is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. 34. 22. In addition to the return of capital, Wesfarmers proposes to undertake a share consolidation of approximately 1 to 0.9876. 79. 28. Some of the information on this website applies to a specific financial year. If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. There was no dividend component as part of this capital management initiative. ITAA 1997 104-135(4) 16. If the Wesfarmers share to which the return of capital relates was acquired by a Wesfarmers shareholder at least 12 months before the payment, a capital gain from CGT event G1 happening may qualify as a discount capital gain under subsection 115-25(1) of the ITAA 1997, provided the other conditions in Division 115 of the ITAA 1997 are satisfied. ITAA 1997 Div 230 Sections 45A, 45B and 45C of the ITAA 1936 do not apply. 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). The capital return has been approved by the shareholders. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. ITAA 1936 318 28. For enquiries, please contact Computershare Investor Services Pty Limited on 1300 558 062 (within Australia) or (+61 3) 9415 4631. 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. 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). 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. 4 September 2013. | August 8, 2022 Accordingly, CGT event G1 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 and continue to own at the Payment Date. The amount of the capital gain is equal to that excess. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. (iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan. As at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. 24. 70. There was no share consolidation in relation to the capital return. The Class Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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. This Ruling applies from 1 July 2021 to 30 June 2022. A capital benefit was provided to Wesfarmers' shareholders. 21. Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. CGT event C2 (section 104-25 of the ITAA 1997) will happen when the return of capital is paid. 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 1997 977-50 The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. In determining whether to recommend to shareholders the approval of the return of capital, the Board reviewed Wesfarmers' assets, liabilities and expected cash flows. ITAA 1936 45B(2)(b) In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers credit rating. ITAA 1997 104-135(3) Shareholders voted in favour of the return of capital at the Annual General Meeting ( AGM) on Thursday, 21 October 2021. 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) 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'. 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. Corporations Act 2001. Maria's capital gain is $200 ($2,500 - $2,300). The last date to purchase shares that were eligible to receive the return of capital was Wednesday, 17 November 2021. Australian Taxation Office (ATO) Class Ruling . All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. However, the circumstances of the return of capital indicate that there was no streaming of capital benefits to some Wesfarmers' shareholders and dividends to other Wesfarmers' shareholders. 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). Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. This will bring the total dividend for the year to $2.1 billion. share capital, Legislative References: : Yes. 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. The Commissioner will not make a determination under either ITAA 1997 104-135 A copy of the Class Ruling is available from the Wesfarmers website (www.wesfarmers.com.au). There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. 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 45A Please find below some information and frequently asked questions in relation to the 2021capital return. . 25. ITAA 1997 109-5 The ruling has determined that the funds will be distributed via a return of capital of 75c per share and a fully franked dividend of 25c. The cost base of the right does not include the cost base or reduced cost base of the share previously owned by the Wesfarmers shareholder that has been applied in working out a capital gain or capital loss made when a CGT event happened to the share - for example, when the Wesfarmers shareholder disposed of the share after the Record Date. ITAA 1997 Subdiv 115-A 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. 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). 47. 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. 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 . 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. ITAA 1997 Div 112 The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. 33. 11. 24. Make sure you have the information for the right year before making decisions based on that information. On 3November 2003 Wesfarmers Limited announced a return of capital ('capital return'). 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). A Wesfarmers shareholder who is a foreign resident or the trustee of a foreign-resident trust for capital gains tax (CGT) purposes, and received the return of capital, can disregard any capital gain made if CGT event G1 happened or disregard any capital gain or capital loss if CGT event C2 happened under section 855-10, provided also that your Wesfarmers share or your right to receive the return of capital on the Wesfarmers shares: 15. 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). If there was any residual from the return of capital payment after the payment had been applied to your loan balance, the remaining balance was paid directly into your bank account on Thursday, 2 December 2021. 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). 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. Subsection 44(1) includes in a shareholder's assessable income any dividends, as defined in subsection 6(1), paid to the shareholder out of profits derived by the company from any source (if the shareholder is a resident of Australia) and from an Australian source (if the shareholder is a non-resident of Australia). We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. She must use the indexed cost base method in all future events affecting these shares. The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. 8 December 2021. Sections 45A and 45B are anti-avoidance provisions which, if they apply, allow the Commissioner to make a determination that section 45C applies to treat all or part of the return of capital to be received by Wesfarmers shareholders as an unfranked dividend. ITAA 1936 45B(3)(b) How did the capital return work and what was the effect on the company? Collectively, shareholders received a total distribution of approximately $2,268million. By . The phrase 'provided with a capital benefit' is defined in subsection 45B(5). ITAA 1936 45B(5)(b) You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you. Therefore, the Wesfarmers shareholders will be provided with a capital benefit under paragraph 45B(5)(b). What will happen to the number of shares I hold? 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). It states that a person is provided with a capital benefit if: 52. Last date for trading in cum return of capital for shares. Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. purchased their shares after the shares started trading on an ex return of capital basis (i.e., from Thursday, 18 November 2021 onwards), the cost base for each share acquired after 19 September 1985 should be reduced by the return of capital amount (on a cents per share basis) for the purpose of calculating any capital gain or capital loss on the ultimate disposal of that share; and. 58. 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. ITAA 1936 6(1) The distribution was entirely capital in nature with no dividend component. WES Indicative Capital Return Timetable Effective Date All trading in WES ETO contracts will be on an adjusted basis effective on the ex-date, Thursday, 18 November 2021. Our diverse business operations cover: home improvement and outdoor living; apparel and general merchandise; office supplies;health, beauty and wellbeing; and an Industrials division with businesses in chemicals, energy and fertilisers, and industrial and safety products. 20. 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. Depending on the outcome, you may have to include some details on your 2003-04 tax return. 37. 40. Return of capital amount - $5.68 for each entitled WES share. Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. This Ruling does not apply to anyone who is subject to the taxation of financial arrangements rules in Division 230 in relation to the scheme outlined in paragraphs 15 to 38 of this Ruling. 1. work out whether you have made a capital gain (you cannot make a capital loss on a return of capital). This is a Tax Office ruling on the tax consequences arising from this return of capital. return of capital on shares In broad terms, section 45B of the ITAA 1936 applies where: 49. AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. Some of the information on this website applies to a specific financial year. 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 Ruling continues to apply after 30 June 2014 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. 16. Taxation Administration Act 1953. ITAA 1997 855-15 Section 45A - streaming of dividends and capital benefits. 29. Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. 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. Mark has not made a capital gain on his shares as a result of the capital return so he does not have to put anything on his 2003-04 tax return to reflect this event. The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. This amount represents your capital proceeds. The capital loss is equal to the amount of the difference (subsection 104-25(3)). 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. 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. On 3November 2003 Wesfarmers Limited announced a proposed return of capital is paid the ITAA 1936 45B ( 5.... 230 Sections 45A, 45B and 45C of the ITAA 1936 6 ( 1 ) the distribution entirely. A specific financial year this website applies to a specific financial year specific financial year made! Affecting these shares was applied to each outstanding Loan balance this will bring the dividend! Applies where certain capital payments are made to shareholders in substitution for dividends bring the dividend... 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