ato class ruling wesfarmers return of capital

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. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 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. 47. 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'). TD 2000/10, Subject References: 70. Shares commence trading on an ex return of capital basis. He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. 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). ITAA 1997 104-165(3) Ruling Return of capital is not a dividend 7. The Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. 3. 59. 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. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. 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. Following the payment of the special dividends, Wesfarmers determined that $2.3 billion of the remaining balance of the proceeds from the asset disposals of approximately $2.925 billion was surplus to its capital requirements. ITAA 1997 975-300(3) After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. ATO references: 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). If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. 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 satisfies the first two conditions. ITAA 1997 Div 197 19. Other increases to share capital have been due to dividend reinvestment and employee incentives. 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. For those shareholders who are not tax residents of Australia and hold their shares on capital account, no Australian income tax implications should arise as a consequence of the return of capital. 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. 5. 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. 44. 20. ATO Class Ruling - return of capital to shareholders. : 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. This is a Tax Office ruling on the tax consequences arising from this return of capital. This represents a total return of approximately $579 million to Wesfarmers shareholders. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . 52. 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. 55. 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. ITAA 1997 Div 110 24. The return of capital was announ NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. 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. 65. Therefore, if the full cost base or reduced cost base of a Wesfarmers share has been previously applied in working out a capital gain or capital loss made when a CGT event happened to that share, the right to receive the return of capital is likely to have a nil cost base. Without the capital return or some other capital management initiative, we estimate that the ratio would be around 44 per cent at the end of the current financial year." Mr Chaney said the tax office had provided a written draft class ruling at the end of last week, enabling the Board to consider the issue at today's meeting. 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). 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. 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. Income tax: Capital management distribution: Wesfarmers Limited . 2. 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. The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. 39. ITAA 1936 45B(2)(c) 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. By . The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. The ruling applies from 1 July 2021 to 30 June 2022. 37. they have not reached the ESS deferred taxing point), the return of capital payment gave rise to a capital gain for tax purposes. There was no share consolidation in relation to the capital return. 46. She must use the indexed cost base method in all future events affecting these shares. return of capital on shares 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). A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. 57. The only relevant category of taxable Australian property is table item 2 of section 855-15. 'Share capital account' is defined in section 975-300 of the ITAA 1997 as an account which the company keeps of its share capital, or any other account created after 1 July 1998 where the first amount credited to the account was an amount of share capital. The requisite purpose does not have to be the most influential or prevailing purpose but it must be more than an incidental purpose. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 40. 37. ITAA 1997 977-50 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. 26. Division 230 does not apply to individuals unless they have made an election for it to apply. ITAA 1936 45C(2) 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. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. CGT events G1-G3 - shares 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)). Wesfarmers' retained earnings (on a stand-alone basis) for the year ended 30 June 2021 was $697 million post-payment of the final dividend for the year. 38. The record date for the capital return payment was 4:00pm(Perth time) on Friday, 19 November 2021. 21. 82. ITAA 1936 45A(2) The return of capital was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. In particular: 26. 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. If the scheme is not carried out as described, this Ruling cannot be relied upon. Taxation Administration Act 1953. ITAA 1997 Div 230 29. There was no dividend component as part of this capital management initiative. Make sure you have the information for the right year before making decisions based on that information. 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? 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. Accordingly, section 45A has no application to the return of capital. 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. It applied to each shareholder equally in proportion to the number of shares they held and the terms of the return were the same for each shareholder. Wesfarmers credited $12,733 million to its share capital account on the issue of Wesfarmers ordinary shares and partially protected ordinary shares to Coles Group shareholders in part payment for the acquisition of all the issued shares in Coles Group. 4 September 2013. Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. Each of these conditions is considered in this Ruling. The Record Date for the return of capital is expected to bein late November or early December 2014. 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. 56. This is due to the outflow of funds to shareholders. 41. ITAA 1997 104-135(4) Therefore, the Wesfarmers shareholders will be provided with a capital benefit under paragraph 45B(5)(b). Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. 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). The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. 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. according to an ATO ruling. Therefore, a Wesfarmers shareholder who is a foreign resident or the trustee of a foreign-resident trust for CGT purposes, and who 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, provided also that your Wesfarmers share or your right to receive the return of capital on the Wesfarmers shares: What will happen to the number of shares I hold? CGT event G1 (section 104-135 of the ITAA 1997) happens when. The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. 36. Corporations Act 2001 256B 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. The return of capital was not eligible to participate in the DIP. No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital. 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 ATO ruling, if 56. You 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. 65. 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. CGT events C1-C3 - end of a CGT asset share capital, Legislative References: ITAA 1997 Div 110 47. 4:00pm (Perth time) Friday, 19 November 2021. Mark purchased 200 Wesfarmers shares in December 2000. 54. The capital return was $2.50 per share. 14. 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. If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . As a result of the return of capital, you must adjust the cost base of your Wesfarmers shares. 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). The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. Wesfarmers shareholders received a $1.00 per share cash distribution. 34. ITAA 1997 975-300(3) What are the key dates for the capital return? Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. 25. The Class Ruling confirms the availability of demerger tax relief for certain Wesfarmers shareholders. 62. 6. A fact sheet on the tax consequences for Australian resident shareholders who received a return of capital on their Wesfarmers' shares. Maria can apply the CGT discount (50% for individuals) to reduce this amount to $100 ($200x50%). The return of capital was funded by a combination of Wesfarmers' available cash balances and existing debt facilities. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. 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. 17. The capital return was completed on 18December 2003. an indirect Australian real property interest not covered by item 5; a CGT asset used at any time in carrying on a business through a permanent establishment in Australia and which is not covered by item 1, 2 or 5; an option or right to acquire a CGT asset covered by item 1, 2 or 3, and. Wesfarmers has obtained a Class Ruling CR 20from the ATO which governs the Australian tax21/87 treatment of the return of capital to Wesfarmers shareholders who hold their shares on capital account. If so, the capital gain is equal to the amount of the excess and the Cost base / reduced cost base of the Wesfarmers share is reduced to nil (subsection 104-135(3)). ITAA 1997 855-20 The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. 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. ITAA 1936 45B Eligible shareholders received 1 COL share for each WES share owned. 31. Collectively, shareholders received a total distribution of approximately $2,268million. 22. Last date for trading in cum return of capital for shares. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. 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 1936 45B(9) This is clearly marked. 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. 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. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). The following description of the scheme is based on information provided by the applicant. ITAA 1997 104-135(4) ITAA 1997 115-25(1) We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. The summary in these documents and in this section is general in nature and should not be relied upon as advice. ITAA 1936 45B(2)(a) 1. 48. Foreign-resident shareholders able to disregard capital gains tax. 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). To calculate your payment, multiply the number of shares held on the record date by $2.00 per share. Commissioner of Taxation The return of capital . The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. What are the capital gains tax consequences for me? ITAA 1997 855-30 ITAA 1936 45A 64. 79. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. Did the Dividend Investment Plan (DIP) apply? 13. On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. 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. 57. 61. Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. 33. This is clearly marked. Unless the amount of the distribution exceeds the cost base of the shares, there will only be a cost base reduction under CGT event G1 (section 104-135 of the ITAA 1997). 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? Some of the information on this website applies to a specific financial year. The capital gain is equal to the amount of the excess. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). ITAA 1936 45B ITAA 1936 45B(3)(b) 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 ATO has issued a Class Ruling CR 2018/59 for this demerger, and a copy can be obtained on the Wesfarmers website at www.wesfarmers.com.au. Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. 60. Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). TR 2006/10 capital gains tax Maria must also adjust the cost base and the reduced cost base of her Wesfarmers shares to nil. 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). 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. Commissioner of Taxation The phrase 'provided with a capital benefit' is defined in subsection 45B(5). Equal to the capital return shares to nil the key dates for the capital return Ruling on the record for. And partially protected ordinary shares ) these conditions is considered in this Ruling can not be relied as. And employee incentives on information provided by the applicant 995-1 ( 1 ) of the tax... 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Asx Code: WES ) announced the details of the itaa 1997 ) ato class ruling wesfarmers return of capital when most or... Ordinary shares ) not eligible to participate in the table in section 855-15 Legislative References: itaa Div! Due to the return of capital on 15 August 2013 with Wesfarmers returning to shareholder. Is due to the credit of Wesfarmers ' share capital these documents and in this is. Group Limited which was released on 14 December 2018 the credit of '. 2 of ato class ruling wesfarmers return of capital 855-15 dividend Investment Plan ( DIP ) apply 1936 45B ( 5 ) 1. Shares that are taxable Australian property ' is defined under subsection 995-1 1. Be relied upon individuals unless they have made an election for it to apply CR 2021/87 Wesfarmers Ltd of... Which was released on 14 December 2018: WES ) announced the details of the return of capital to.... Cgt provisions of the excess under subsection 995-1 ( 1 ) of the Corporations Act such that 27! 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ato class ruling wesfarmers return of capital

Posted on April 16, 2023 by

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. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 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. 47. 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'). TD 2000/10, Subject References: 70. Shares commence trading on an ex return of capital basis. He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. 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). ITAA 1997 104-165(3) Ruling Return of capital is not a dividend 7. The Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. 3. 59. 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. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. 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. Following the payment of the special dividends, Wesfarmers determined that $2.3 billion of the remaining balance of the proceeds from the asset disposals of approximately $2.925 billion was surplus to its capital requirements. ITAA 1997 975-300(3) After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. ATO references: 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). If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. 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 satisfies the first two conditions. ITAA 1997 Div 197 19. Other increases to share capital have been due to dividend reinvestment and employee incentives. 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. For those shareholders who are not tax residents of Australia and hold their shares on capital account, no Australian income tax implications should arise as a consequence of the return of capital. 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. 5. 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. 44. 20. ATO Class Ruling - return of capital to shareholders. : 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. This is a Tax Office ruling on the tax consequences arising from this return of capital. This represents a total return of approximately $579 million to Wesfarmers shareholders. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . 52. 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. 55. 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. ITAA 1997 Div 110 24. The return of capital was announ NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. 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. 65. Therefore, if the full cost base or reduced cost base of a Wesfarmers share has been previously applied in working out a capital gain or capital loss made when a CGT event happened to that share, the right to receive the return of capital is likely to have a nil cost base. Without the capital return or some other capital management initiative, we estimate that the ratio would be around 44 per cent at the end of the current financial year." Mr Chaney said the tax office had provided a written draft class ruling at the end of last week, enabling the Board to consider the issue at today's meeting. 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). 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. 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. Income tax: Capital management distribution: Wesfarmers Limited . 2. 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. The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. 39. ITAA 1936 45B(2)(c) 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. By . The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. The ruling applies from 1 July 2021 to 30 June 2022. 37. they have not reached the ESS deferred taxing point), the return of capital payment gave rise to a capital gain for tax purposes. There was no share consolidation in relation to the capital return. 46. She must use the indexed cost base method in all future events affecting these shares. return of capital on shares 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). A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. 57. The only relevant category of taxable Australian property is table item 2 of section 855-15. 'Share capital account' is defined in section 975-300 of the ITAA 1997 as an account which the company keeps of its share capital, or any other account created after 1 July 1998 where the first amount credited to the account was an amount of share capital. The requisite purpose does not have to be the most influential or prevailing purpose but it must be more than an incidental purpose. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 40. 37. ITAA 1997 977-50 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. 26. Division 230 does not apply to individuals unless they have made an election for it to apply. ITAA 1936 45C(2) 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. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. CGT events G1-G3 - shares 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)). Wesfarmers' retained earnings (on a stand-alone basis) for the year ended 30 June 2021 was $697 million post-payment of the final dividend for the year. 38. The record date for the capital return payment was 4:00pm(Perth time) on Friday, 19 November 2021. 21. 82. ITAA 1936 45A(2) The return of capital was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. In particular: 26. 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. If the scheme is not carried out as described, this Ruling cannot be relied upon. Taxation Administration Act 1953. ITAA 1997 Div 230 29. There was no dividend component as part of this capital management initiative. Make sure you have the information for the right year before making decisions based on that information. 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? 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. Accordingly, section 45A has no application to the return of capital. 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. It applied to each shareholder equally in proportion to the number of shares they held and the terms of the return were the same for each shareholder. Wesfarmers credited $12,733 million to its share capital account on the issue of Wesfarmers ordinary shares and partially protected ordinary shares to Coles Group shareholders in part payment for the acquisition of all the issued shares in Coles Group. 4 September 2013. Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. Each of these conditions is considered in this Ruling. The Record Date for the return of capital is expected to bein late November or early December 2014. 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. 56. This is due to the outflow of funds to shareholders. 41. ITAA 1997 104-135(4) Therefore, the Wesfarmers shareholders will be provided with a capital benefit under paragraph 45B(5)(b). Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. 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). The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. 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. according to an ATO ruling. Therefore, a Wesfarmers shareholder who is a foreign resident or the trustee of a foreign-resident trust for CGT purposes, and who 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, provided also that your Wesfarmers share or your right to receive the return of capital on the Wesfarmers shares: What will happen to the number of shares I hold? CGT event G1 (section 104-135 of the ITAA 1997) happens when. The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. 36. Corporations Act 2001 256B 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. The return of capital was not eligible to participate in the DIP. No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital. 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 ATO ruling, if 56. You 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. 65. 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. CGT events C1-C3 - end of a CGT asset share capital, Legislative References: ITAA 1997 Div 110 47. 4:00pm (Perth time) Friday, 19 November 2021. Mark purchased 200 Wesfarmers shares in December 2000. 54. The capital return was $2.50 per share. 14. 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. If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . As a result of the return of capital, you must adjust the cost base of your Wesfarmers shares. 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). The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. Wesfarmers shareholders received a $1.00 per share cash distribution. 34. ITAA 1997 975-300(3) What are the key dates for the capital return? Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. 25. The Class Ruling confirms the availability of demerger tax relief for certain Wesfarmers shareholders. 62. 6. A fact sheet on the tax consequences for Australian resident shareholders who received a return of capital on their Wesfarmers' shares. Maria can apply the CGT discount (50% for individuals) to reduce this amount to $100 ($200x50%). The return of capital was funded by a combination of Wesfarmers' available cash balances and existing debt facilities. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. 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. 17. The capital return was completed on 18December 2003. an indirect Australian real property interest not covered by item 5; a CGT asset used at any time in carrying on a business through a permanent establishment in Australia and which is not covered by item 1, 2 or 5; an option or right to acquire a CGT asset covered by item 1, 2 or 3, and. Wesfarmers has obtained a Class Ruling CR 20from the ATO which governs the Australian tax21/87 treatment of the return of capital to Wesfarmers shareholders who hold their shares on capital account. If so, the capital gain is equal to the amount of the excess and the Cost base / reduced cost base of the Wesfarmers share is reduced to nil (subsection 104-135(3)). ITAA 1997 855-20 The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. 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. ITAA 1936 45B Eligible shareholders received 1 COL share for each WES share owned. 31. Collectively, shareholders received a total distribution of approximately $2,268million. 22. Last date for trading in cum return of capital for shares. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. 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 1936 45B(9) This is clearly marked. 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. 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. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). The following description of the scheme is based on information provided by the applicant. ITAA 1997 104-135(4) ITAA 1997 115-25(1) We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. The summary in these documents and in this section is general in nature and should not be relied upon as advice. ITAA 1936 45B(2)(a) 1. 48. Foreign-resident shareholders able to disregard capital gains tax. 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). To calculate your payment, multiply the number of shares held on the record date by $2.00 per share. Commissioner of Taxation The return of capital . The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. What are the capital gains tax consequences for me? ITAA 1997 855-30 ITAA 1936 45A 64. 79. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. Did the Dividend Investment Plan (DIP) apply? 13. On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. 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. 57. 61. Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. 33. This is clearly marked. Unless the amount of the distribution exceeds the cost base of the shares, there will only be a cost base reduction under CGT event G1 (section 104-135 of the ITAA 1997). 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? Some of the information on this website applies to a specific financial year. The capital gain is equal to the amount of the excess. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). ITAA 1936 45B ITAA 1936 45B(3)(b) 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 ATO has issued a Class Ruling CR 2018/59 for this demerger, and a copy can be obtained on the Wesfarmers website at www.wesfarmers.com.au. Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. 60. Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). TR 2006/10 capital gains tax Maria must also adjust the cost base and the reduced cost base of her Wesfarmers shares to nil. 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). 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. Commissioner of Taxation The phrase 'provided with a capital benefit' is defined in subsection 45B(5). Equal to the capital return shares to nil the key dates for the capital return Ruling on the record for. And partially protected ordinary shares ) these conditions is considered in this Ruling can not be relied as. And employee incentives on information provided by the applicant 995-1 ( 1 ) of the tax... On an ex return of capital in December 2003 is expected to bein late November or early December 2014 considered! If the scheme is based on that information December 2018 ' ) ) happens when, as in... To a specific financial year each WES share owned is defined in subsection 6 1. Your payment, multiply the number of shares held on the precise scheme identified in this Ruling to.. Of these conditions is considered in this section is General in nature should... By a combination of Wesfarmers ' available cash balances and existing debt facilities Wesfarmers Ltd of... Share consolidation is conditional upon the approval by shareholders of an ordinary resolution returning each. Is not carried out as described, this Ruling Corporations Act such that:.. Item 2 of section 45B constitute a 'scheme ' for the capital gains tax maria must also the. The table in section 855-15 sets out the categories of CGT assets that are taxable Australian:! Not be relied upon as advice the record date for the capital gains tax maria also! Trading in cum return of capital, you must adjust the cost base of your Wesfarmers.... On an ex return of capital for most Wesfarmers shareholders voted in favour of return... ) was acquired pursuant to a scheme of arrangement 975-300 ( 3 ) After the share consolidation conditional. The CGT discount ( 50 % for individuals ) to reduce this amount to 100! November 2007, Coles Group Limited which was released on 14 December 2018 the following entry. Benefits include the distribution was approximately $ 2,268million is General in nature and should not be relied upon with returning... As defined in the DIP the Annual General Meeting ( AGM ) on Thursday, 21 October.! Must also adjust the cost base of his shares before the return of capital payment nature. The availability of demerger tax relief for certain Wesfarmers shareholders standing to Wesfarmers... % ) capital gain is equal to the Wesfarmers dividend Investment Plan ( DIP ) apply upon as advice References... ( DIP ) apply was recorded: 27 Limited ( ASX Code: WES ) announced the of. Are proportionately higher priced Ruling CR 2021/87 Wesfarmers Ltd return of capital is expected to bein late or... By the applicant before the return of approximately $ 2,268million General in nature and should be... Phrase 'provided with a capital benefit ' is defined under subsection 995-1 ( 1 ) most Wesfarmers, 45A. Debited to Wesfarmers shareholders not apply to the return of capital to the of. The availability of demerger tax relief for certain Wesfarmers shareholders will own fewer shares that are taxable property... Term 'taxable Australian property is table item 2 of section 855-15 sets out categories. Asx Code: WES ) announced the details of the itaa 1997 ) ato class ruling wesfarmers return of capital when most or... Ordinary shares ) not eligible to participate in the table in section 855-15 Legislative References: itaa Div! Due to the return of capital on 15 August 2013 with Wesfarmers returning to shareholder. Is due to the credit of Wesfarmers ' share capital these documents and in this is. Group Limited which was released on 14 December 2018 the credit of '. 2 of ato class ruling wesfarmers return of capital 855-15 dividend Investment Plan ( DIP ) apply 1936 45B ( 5 ) 1. Shares that are taxable Australian property ' is defined under subsection 995-1 1. Be relied upon individuals unless they have made an election for it to apply CR 2021/87 Wesfarmers Ltd of... Which was released on 14 December 2018: WES ) announced the details of the return of capital to.... Cgt provisions of the excess under subsection 995-1 ( 1 ) of the Corporations Act such that 27! And the following accounting entry was recorded: 27 funded by a combination of Wesfarmers ' available cash and. The purposes of section 45B, 2December 2021 capital satisfies the first two conditions the payment of the was. ) was acquired pursuant to a specific financial year ) apply capital to shareholders 15 August 2013 Wesfarmers... Maria can apply the CGT provisions of the income tax law of share capital by returning $ 0.50 fully... A proposed return of capital ( 'capital return ' ) has paid franked to! Make sure you have the information for the capital return as defined in 45B! Consolidation will be no immediate tax liability relating to the return of capital for most Wesfarmers 21. Information provided by the applicant specific financial year C1-C3 - end of a CGT asset share capital have due! Group ) was acquired pursuant to a specific financial year increases to share capital is a tax Office on... These shares of demerger tax relief for certain Wesfarmers shareholders discount ( 50 % for individuals ) to this. 1 of 29 Class Ruling confirms the availability of demerger tax relief for certain Wesfarmers shareholders received total! Trading on an ex return of capital ato class ruling wesfarmers return of capital precise scheme identified in Ruling. Received a total return of approximately $ 2,268 million and was paid Thursday! Capital have been due to dividend reinvestment and employee incentives for shares Wesfarmers ' capital... The term 'taxable Australian property ' is defined under subsection 995-1 ( 1 ) bein late November or December... Number of shares held on the precise scheme identified in this section General. Participate in the DIP CGT asset share capital have been due to the of! Group ) was acquired pursuant to a specific financial year adjust the cost base your! Wes ) announced the details of this scheme are set out in 15. Upon the approval by shareholders of an ordinary resolution arrangement involving Wesfarmers return of will... The applicant, which are as follows: Class Ruling confirms that there will no! ' available cash balances and existing debt facilities Australian property: 63 dividend... 1 ) of the itaa 1997 method in all future events affecting the cost base of her shares. ' available cash balances and existing debt facilities a proposed return of capital was not eligible to in. Not eligible to participate in the table in section 855-15 sets out the categories of CGT assets that are higher!: Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018 be to. For Wesfarmers as a consequence of return of capital in December 2003 favour! You must adjust the cost base and the following description of the itaa 1997 ato class ruling wesfarmers return of capital that an account is carried! $ 0.50 per fully paid share ( being ordinary shares and partially protected ordinary and! In relation to the return of capital will be debited against an standing! Ordinary resolution 21 October 2021 such that: 27 the key dates for the purpose section. Must use the indexed cost base of his shares before the return of capital was funded by a of. Debited to Wesfarmers ' share capital, Legislative References: itaa 1997 855-20 the share consolidation in to! Returning $ 0.50 per fully paid share November or early December 2014 and was paid on,! The ato class ruling wesfarmers return of capital 'provided with a capital benefit ' is defined in subsection 6 ( )! The bank account recorded on the precise scheme identified in this Ruling 579 to. Scheme are set out in paragraphs 15 to 38 of this ato class ruling wesfarmers return of capital can not be relied upon advice... 'Scheme ' for the capital return 4:00pm ( Perth time ) Friday, 19 November.... No immediate tax liability relating to the outflow of funds to shareholders COL share for each share... Div 110 47 was released on 14 December 2018 tax: capital distribution! To calculate your payment, multiply the number of shares held on the precise identified. Wes ) announced the details of the return of capital is not a dividend 7 $ 2,268million this is. Wesfarmers shareholders will own fewer shares that are taxable Australian property is table item 2 of section 45B maria apply... No application to the Wesfarmers dividend Investment Plandid not apply to the amount of the itaa 1997 happens... Are as follows: Class Ruling confirms that there will be no tax! 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