80. The return of capital demonstrated Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders. The Class Ruling does not apply to Wesfarmers shareholders who hold their shares on revenue account or as trading stock. Some of the information on this website applies to a specific financial year. ITAA 1936 45B(5) 8. 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. 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. NO 1-PVCWOSF, Legislative References: CGT events C1-C3 - end of a CGT asset Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. Return of Capital = $750 Fully Franked Dividend = $250 Units on hand after consolidation: 983 (1000 x 0.9827 - rounded to the next whole number of shares - See Point 25 in the ATO Class Ruling 2014/76 ). A Wesfarmers shareholder will make a capital loss if the capital proceeds from the ending of the right are less than the reduced cost base of the right. Return of capital amount - $5.68 for each entitled WES share. Mark received a total of $500 (200 x $2.50) in the return of capital. 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. ITAA 1997 Div 230 Using this method, Maria has made no capital gain on the return of capital, so she does not have to put anything on her 2003-04 tax return to reflect this event. 16. This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. 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). 40. 67. 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. 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. 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. Therefore, you can treat a capital gain made when CGT event C2 happened to your right to the payment of the return of capital as a discount capital gain under Subdivision 115-A if you acquired your Wesfarmers share at least 12 months before the Payment Date (subsection 115-25(1)) provided the other conditions in Subdivision 115-A are satisfied. Some of the information on this website applies to a specific financial year. : Yes. 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. Shares commence trading on an ex return of capital basis. ITAA 1936 45C(1) The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. You can treat a capital gain made when CGT event G1 or CGT event C2 happened as a discount capital gain if you acquired your Wesfarmers shares at least 12 months before the Payment Date (subsection 115-25(1)), provided the other conditions in Subdivision 115-A are satisfied. 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. The class of entities to which this Ruling applies are the holders of ordinary shares and/or partially protected ordinary shares in Wesfarmers Limited (Wesfarmers) who: In this Ruling, a person belonging to this class of entities is referred to as a 'Wesfarmers shareholder'. The converted shares will have the same date of acquisition as the original shares to which they relate. Make sure you have the information for the right year before making decisions based on that information. 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). 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. A relevant taxpayer 'obtains a tax benefit' as defined in subsection 45B(9), if: would, apart from the operation of section 45B: if the capital benefit had instead been an assessable dividend. The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. The ATO has issued Class Ruling CR 2018/59 . Will my shares be worth less after the capital return? 24. 29. Ruling Return of capital is not a dividend 7. For your other shares - reduce the cost base and reduced cost base by $2.50 each. The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. Wesfarmers primary objective is to deliver satisfactory returns to shareholders through financial discipline and strong management of a diversified portfolio of businesses. 20. A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its cost base. 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 Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. 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. 4 September 2013. This is due to the outflow of funds to shareholders. Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). ITAA 1997 Subdiv 115-A 19. 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 will make a capital gain if the amount of the return of capital ($0.50 per fully paid share) is more than the cost base of the Wesfarmers share (subsection 104-135(3) of the ITAA 1997). Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. 56. This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. As a result of the return of capital, you must adjust the cost base of your Wesfarmers shares. 39. Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the return of capital. 64. She must use the indexed cost base method in all future events affecting these shares. 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. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. Create your myGov account and link it to the ATO, Help and support to lodge your tax return, Occupation and industry specific income and work-related expenses, Residential rental properties and holiday homes, Instalment notices for GST and PAYG instalments, Your obligations to workers and independent contractors, Encouraging NFP participation in the tax system, Australian Charities and Not-for-profits Commission, Departing Australia Superannuation Payment, Small Business Superannuation Clearing House, Annual report and other reporting to Parliament, Complying with procurement policy and legislation, Wesfarmers Group Limited (Wesfarmers) return of capital. The capital gain is equal to the amount of the excess. The proportion of funding from each source was determined having regard to the most cost-effective source of funding available as at the date of payment. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. ITAA 1997 855-10(1) Other increases to share capital have been due to dividend reinvestment and employee incentives. The right to receive the payment of the return of capital is one of the rights inherent in a Wesfarmers share at the Record Date. ITAA 1997 975-300 66. 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. 13. 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. 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. The return of capital was recorded as a debit to Wesfarmers untainted share capital account. ITAA 1997 104-135 Maria's indexed cost base is $3,555.80 ($2,300 x 1.546). The capital return was $2.50 per share. Annual General Meeting, at which shareholders voted to approve the return of capital. Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. This represents a total return of approximately $579 million to Wesfarmers shareholders. 22. 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. 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)). 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. ITAA 1997 104-135 This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . Some of the information on this website applies to a specific financial year. ITAA 1936 45B The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 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. 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. ITAA 1997 115-25(1) Non-resident shareholders should seek specific advice in relation to the tax consequences arising from the return of capital under the laws of their country of residence. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. Wesfarmers shareholders received a 200 cents per share cash distribution. 22. 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. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. Make sure you have the information for the right year before making decisions based on that information. ITAA 1997 855-30 The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. 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. This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. ITAA 1936 45B(8) If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. The Commissioner will not make a determination under either ITAA 1936 44(1) How much did I receive and how was the payment made? On 27 August 2021, Wesfarmers announced that it will return share capital to Wesfarmers shareholders of $2.00 per Wesfarmers share totalling $2.3 billion (return of capital). Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. 63. 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: The payment was entirely capital in nature with no dividend component. 44. 61. Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. To calculate your payment, multiply the number of shares held on the record date by $2.00 per share. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. Copyright Act 1968 ITAA 1997 Div 110 We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. 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. For information on how to work out the cost base (and reduced cost base) for shares, see the Guide to capital gains tax. The return of capital . 10. The capital loss is equal to the amount of the difference (subsection 104-25(3)). The high dividend payout policy is intended to be maintained following the return of capital to shareholders. Maria must also adjust the cost base and the reduced cost base of her Wesfarmers shares to nil. 53. ITAA 1997 109-5 a capital payment (it was not classed as a dividend for any purpose and had no dividend component). Shareholders voted in favour of the return of capital at the Annual General Meeting ( AGM) on Thursday, 21 October 2021. 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. 6. ITAA 1936 45A(2) The Class Ruling confirms the availability of demerger tax relief for certain Wesfarmers shareholders. Accordingly, section 45A has no application to the return of capital. The requisite purpose does not have to be the most influential or prevailing purpose but it must be more than an incidental purpose. 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 This is clearly marked. 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. 51. 32. 46. ITAA 1936 45B(2)(a) ITAA 1936 44 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. Maria must reduce the cost base of her shares by $2,500 to $1,055.80. 43. 59. At 30 June 2007, Wesfarmers' share capital was $2,256 million, with retained earnings of $1,131 million (effectively $588 million after the final 2007 dividend of $543 million). 52. 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 at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). return of capital on shares AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. 42. 42. 21. 46. The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. CGT event G1 (section 104-135 of the ITAA 1997) happens when. 18. Taxation Administration Act 1953. 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. ITAA 1997 975-300(3) 31. ITAA 1997 Div 115 Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. Depending on the outcome, you may have to include some details on your 2003-04 tax return. ITAA 1997 855-10 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). Australian Taxation Office for the Commonwealth of Australia. 56. The capital return was completed on 18December 2003. 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. 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). 64. If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. Under the return of capital, all shareholders were treated in the same manner. ITAA 1997 995-1(1) 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. The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. 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). 69. 37. This Ruling applies from 1 July 2021 to 30 June 2022. 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. 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? However, having regard to the relevant circumstances of the scheme, it cannot be concluded that the scheme was entered into or carried out for a more than incidental purpose of enabling Wesfarmers shareholders to obtain a tax benefit. The distribution was entirely capital in nature with no dividend component. TR 2006/10 ITAA 1936 45C ITAA 1997 Div 112 The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 35. Corporations Act 2001 256C. The Payment Date is anticipated to be late November to early December 2013. Ruling Return of capital is not a dividend 7. 20. This Ruling applies from 1 July 2013 to 30 June 2014. 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. The ruling applies from 1 July 2021 to 30 June 2022. 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. ITAA 1997 116-20(1) There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. 22. Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. 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. 21. 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