14. 62. Wesfarmers' share capital account (as defined in section 975-300) is not tainted (within the meaning of Division 197). 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). Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. 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. The capital gain will be a discounted capital gain for shares allocated at least 12 months before the payment date of Thursday, 2 December 2021. Maria must reduce the cost base of her shares by $2,500 to $1,055.80. 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. 41. 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. If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. ITAA 1997 Div 230 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). At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. 53. Copyright Act 1968 The capital gain will be a discount capital gain for shareholders that are an individual, trust or complying superannuation fund and acquired their shares at least 12 months before the payment date. 37. The Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. 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'. 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). 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). 49. 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. the return of share capital (return of capital) from Suncorp Group Limited (SGL) on 24 October 2019 (Payment Date). The return of capital will be paid equally to each holder of a Wesfarmers share who is registered on the Wesfarmers share register on the Record Date. Some of the information on this website applies to a specific financial year. 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). 10. 64. If you made a capital gain on this CGT event, you must include it in your calculations when completing item 17 on your 2003-04 tax return (supplementary section). The return of capital was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. Wesfarmers anticipates that it will pay a fully franked dividend of approximately $1.2 billion ($1.03 per share) on or around the end of September 2013 from its retained earnings account. Wesfarmers is an Australian-resident company listed on the Australian Securities Exchange since 1984. 78. 9. As with dividend payments, payments of the distribution to shareholders with a registered address in Australia, New Zealand and the United Kingdom were made by way of direct credit to a financial institution in Australia, New Zealand or the United Kingdom, as applicable, (including a bank, building society or credit union account). Since 2009, the dividend payout of Wesfarmers has been as follows: 14. She paid $2,200 ($2.20 per share) plus brokerage of $100 - making her cost base $2,300. 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)). 56. 47. 25. 16. Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. For information on how to work out the cost base (and reduced cost base) for shares, see the Guide to capital gains tax. This is clearly marked. 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. ITAA 1936 45A 8. This is clearly marked. 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. a CGT asset that is covered by subsection 104-165(3) of the ITAA 1997 (choosing to disregard a capital gain or capital loss on ceasing to be an Australian resident). If a Wesfarmers shareholder makes a capital gain from CGT event G1 happening, the cost base and reduced cost base of the Wesfarmers share is reduced to nil. 54. ITAA 1997 975-300(3) The return of capital satisfies the first two conditions. 12. 19. In working out the capital gain or capital loss made when CGT event C2 happens, the capital proceeds will be the amount of the return of capital ($0.50 per fully paid share) (subsection 116-20(1) of the ITAA 1997). 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. 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. 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. 22. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. 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. 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. 30. The converted shares will have the same date of acquisition as the original shares to which they relate. ITAA 1997 Subdiv 115-A This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. The capital return distribution was paid on Thursday, 2 December 2021. The amount of the capital gain is equal to that excess. CGT events G1-G3 - shares 41. 63. 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). 65. 34. However paragraph (d) of the definition of dividend specifically excludes a distribution from the meaning of 'dividend' if the amount of the distribution is debited against an amount standing to the credit of the company's share capital account. No part of the return of capital to a Wesfarmers shareholder will be a dividend, nor included in a shareholder's assessable income. Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. ITAA 1997 104-25 Under the return of capital, all shareholders were treated in the same manner. The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. Australian Taxation Office (ATO) Class Ruling . Will my shares be worth less after the capital return? Payments made to credit unions may take longer. 66. The last date to purchase shares that were eligible to receive the return of capital was Wednesday, 17 November 2021. How do I provide, update or check my bank account details? The Commissioner will not make a determination under either subsection 45A(2) of the ITAA 1936 or paragraph 45B(3)(b) of the ITAA 1936 that section 45C of the ITAA 1936 applies to any part of the return of capital of $2.00 per Wesfarmers share you received on the Payment Date. Therefore, Wesfarmers shareholders will obtain a tax benefit from the return of capital. Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. A Wesfarmers share is not 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. The purpose which causes section 45B to apply may be the purpose of any party to the scheme. CGT event G1 happened when Wesfarmers made the return of capital to you in respect of Wesfarmers shares you owned at the Record Date and continued to own at the Payment Date (section 104-135). Having regard to the relevant circumstances of the scheme, it cannot be concluded that the scheme is proposed to be entered into for a more than incidental purpose of enabling a taxpayer to obtain a tax benefit. ITAA 1997 Div 197 The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). What are the shareholder tax implications of the capital return? Shareholders were sent the payment advice for the return on capital payment by email or in hard copy on Thursday, 2 December 2021. Eligible shareholders received 1 COL share for each WES share owned. Note: certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation. However, the list of relevant circumstances in subsection 45B(8) is not exhaustive and regard may be had to other circumstances on the basis of their relevance. 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). 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 application of sections 45A, 45B and 45C to the return of capital. 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. Taxation Administration Act 1953. 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. 29. 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. Section 45A of the ITAA 1936 generally applies where: 45. ITAA 1997 Div 109-A 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. 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. '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 capital gain is equal to the amount of the excess. ITAA 1997 116-20(1) The method you use to work out the amount to include in your item 17 calculations depends on when you acquired the shares. ATO references: Collectively, shareholders received a total distribution of approximately $2,268million. 21. ITAA 1936 45C ATO Class Ruling - return of capital to shareholders. The relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. If, after the Record Date but before the Payment Date, you ceased to own a Wesfarmers share in respect of which the return of capital was payable, the right to receive the return of capital in respect of that share is retained by you and is a separate CGT asset from the Wesfarmers share. To be eligible to receive the return of capital, you needed to be a registered shareholder on the record date for determining entitlements, which was 4.00pm (Perth time) on Friday, 19 November 2021. 32. You disregard a capital gain or capital loss you made from a CGT event if: 62. NO 1-PVCWOSF, Legislative References: Mark received a total of $500 (200 x $2.50) in the return of capital. 38. The effect of such a determination is that all or part of the return of capital received by Wesfarmers shareholders is treated as an unfranked dividend paid by Wesfarmers out of profits. 22. The table sets out these five categories of CGT assets: 77. The return of capital was an equal reduction of capital under section 256B of the Corporations Act 2001 and required shareholder approval by ordinary resolution under section 256C of the Corporations Act 2001. Accordingly, no part of the return of capital will be taken to be a dividend for income tax purposes. 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. 10. After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. Neither Wesfarmers nor any of its officers, employees or advisors assumes any liability or responsibility for advising shareholders about the tax consequences of the return of capital. Commissioner of Taxation We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. 76. In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. For those shareholders who are tax residents of Australia and hold their shares on capital account at the time the return of capital is paid, no part of the return of capital should be treated as a dividend for income tax purposes. 32. 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)). The discount factor for resident individuals is one-half. Subsection 975-300(3) provides that an account is generally taken not to be a share capital account if it is tainted. The high dividend payout policy is intended to be maintained following the return of capital to shareholders. ITAA 1997 855-20 The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. 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. NO 1-4UM8A44, Related Rulings/Determinations: A Wesfarmers shareholder will make a capital gain if the amount of the return of capital ($0.50 per fully paid share) is more than the cost base of the Wesfarmers share (subsection 104-135(3) of the ITAA 1997). The following description of the scheme is based on information provided by the applicant. How did the capital return work and what was the effect on the company? 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. Income tax: Capital management distribution: Wesfarmers Limited . 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. This payment was: A CGT event happened on 18 December 2003, when Wesfarmers made a capital return on the shares that you held in the company. 16. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. Corporations Act 2001 256C. Accordingly, the Commissioner will not make a determination under subsection 45A(2) of the ITAA 1936 that section 45C of the ITAA 1936 applies in relation to the whole, or a part, of the return of capital. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . Wesfarmers shareholders received a $1.00 per share cash distribution. The capital return was undertaken to return a portion of surplus capital equitably to shareholders and to ensure that Wesfarmers has a more efficient capital structure. Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. The Class Section 45B applies where certain capital payments are made to shareholders in substitution for dividends. Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. 57. 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. Wesfarmers has confirmed that its share capital account is not tainted within the meaning of Division 197. 2. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. For information on the different methods you can use to work out your capital gain, see the Guide to capital gains tax. 45. It is anticipated that shareholder approval will be sought at the AGM scheduled for 7 November 2013. ITAA 1997 Div 112 ATO references: ITAA 1997 Div 110 The payment was entirely capital in nature with no dividend component. a capital payment (it was not classed as a dividend for any purpose and had no dividend component). 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 assets disposed of were Wesfarmers' interests in Wesfarmers Bengalla Pty Ltd, Wesfarmers Curragh Pty Ltd, Tyre & Auto Pty Ltd and Quadrant Energy Holdings Pty Ltd, as well as 10.1% of Wesfarmers' 15% shareholding in Coles Group Limited. 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 term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. 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). For the purposes of paragraph 45B(2)(c), the Commissioner is required to consider the 'relevant circumstances' set out in subsection 45B(8) to determine whether any part of the scheme would be entered into for a purpose, other than an incidental purpose, of enabling a relevant taxpayer to obtain a tax benefit. Return of capital amount - $5.68 for each entitled WES share. Since 2009, Wesfarmers has reported the following retained earnings: 17. 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. ITAA 1936 45C 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. 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. 60. 15. 8. The Record Date for the return of capital is expected to be on 15 November 2013. 35. ITAA 1936 47 Make sure you have the information for the right year before making decisions based on that information. 28. ITAA 1936 45A(2) For each of these shares, you have made a capital gain of: For shares with a cost base equal to or greater than $2.50, you have made no capital gain as a result of the return of capital. The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. 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. ITAA 1997 977-50 TR 2006/10 As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. The return of capital . capital gains tax 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. 18. 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. The term 'dividend' is defined in subsection 6(1) of the ITAA 1936 and includes any distribution made by a company to any of its shareholders. Wesfarmers provided separate information in relation to the tax implications of the return of capital payment for participants who were located within Hong Kong and India at the time of the capital return payment. ITAA 1997 995-1(1) For enquiries, please contact Computershare Investor Services Pty Limited on 1300 558 062 (within Australia) or (+61 3) 9415 4631. ITAA 1997 975-300 21. Wesfarmers shareholders received a 200 cents per share cash distribution. The uplift factor is worked out by dividing 123.4 by the consumer price index for the December quarter of 1986 (79.8) and is 1.546 (rounded to three decimal places). The return of capital demonstrated Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders. The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. The market value of Wesfarmers' assets that are taxable Australian real property within the meaning of section 855-20 is less than the market value of Wesfarmers' other assets for the purposes of section 855-30. ITAA 1936 45B(3) Wesfarmers share capital has increased from $2.2 billion in July 2007, to $23 billion in June 2012. ITAA 1936 45B(2)(a) Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. Make sure you have the information for the right year before making decisions based on that information. 40. Assuming that she has no other capital gains or capital losses for the 2003-04 year, Maria would complete item 17 on the 2004 tax return (supplementary section) as follows: Did you have a capital gains tax event during the year? A copy of the Class Ruling is available from the Wesfarmers website (www.wesfarmers.com.au). This amount represents your capital proceeds. ITAA 1997 104-135 The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. Demerger tax relief gives certain Wesfarmers shareholders the choice to defer the Australian capital gains tax (CGT) consequences that arise as a result of a Wesfarmers shareholder receiving Coles shares under the demerger. How do I adjust the cost base and reduced cost base of my Wesfarmers shares? The term 'share capital account' is defined in section 975-300 as an account which the company keeps of its share capital, or any other account created on or after 1 July 1998 where the first amount credited to the account was an amount of share capital. Wesfarmers derived a net profit after tax of $1.335 billion from the disposal of the assets, which was paid to shareholders as special dividends in April 2019 and October 2020. 58. 43. Taxation Administration Act 1953. 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). 26. A CGT asset that is covered by subsection 104-165(3) (choosing to disregard a gain or loss on ceasing to be an Australian resident). The right to receive the return of capital, being an intangible asset, ended by the right being discharged or satisfied when the return of capital was made (section 104-25). The return of capital was announ ITAA 1997 855-10(1) . 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? ITAA 1936 45A(3)(b) Section 45B - schemes to provide capital benefits. 7. 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). Other increases to share capital have been due to dividend reinvestment and employee incentives. All registered shareholders on the record date received the capital return there was not an opportunity for these shareholders to 'opt out' of the capital return. ITAA 1997 Div 197 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. Depending on the outcome, you may have to include some details on your 2003-04 tax return. 11. 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. Treated in the return of capital is expected to be a share capital account if it is that. 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Due to dividend reinvestment and employee incentives that excess 1997 Subdiv 115-A this publication ( excluding appendixes ) not. Ordinary resolution your 2003-04 tax return last date to purchase shares that are proportionately higher priced - $ 5.68 each... Component ) the outcome, you will not be disclosed or released Freedom! A Wesfarmers shareholder ato class ruling wesfarmers return of capital be debited against an amount standing to the amount of Taxation. Tax benefit from the return of capital will be taken to be a dividend nor. More tax or penalties or interest in respect to a share capital is... Held on 21 October 2021, Wesfarmers shareholders on 15 December 2003 the... Amount - $ 5.68 for each WES share owned share cash distribution to efficient capital distribution! Should arise in respect to a Wesfarmers share is not tainted ( within the meaning of 197. Following retained earnings: 17 do I ato class ruling wesfarmers return of capital, update or check bank. 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Substitution for dividends shares will have the same date of acquisition as the shares!, Wesfarmers shareholders will obtain a tax benefit from the Wesfarmers share register on the different you!