ITAA 1936 45A(3)(b) As Wesfarmers has a high dividend payout ratio and distributes, where possible, available franking credits, a return of capital was seen as the most efficient distribution of capital to shareholders. A maximum of approximately 9.57% of Wesfarmers shares are pre-CGT assets. TAA 1953 54. Annual General Meeting, at which shareholders voted to approve the return of capital. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. 37. 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 relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. The return of capital was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. 68. Section 45B applies where certain capital payments are made to shareholders in substitution for dividends. 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. Did the Dividend Investment Plan (DIP) apply? 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. 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 how to work out the cost base (and reduced cost base) for shares, see the Guide to capital gains tax. Expand Company Description ATO Class Ruling - return of capital to shareholders StockBot 357,511 posts about a year ago WES released this announcement to the ASX on 8 December 2021, 17:19. ITAA 1936 45B(2)(a) 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. Details of this re turn of capital are set out in paragraphs 14 to 46 of this Ruling. The question is whether it would be concluded that a person who entered into or carried out the scheme did so for the purpose of obtaining a tax benefit for the relevant taxpayer in respect of the capital benefit. Wesfarmers Limited was founded in 1914 and is headquartered in Perth, Australia. If the return of capital of $2.00 per Wesfarmers share you received was not more than the cost base of the share, the Cost base / reduced cost base of each share is reduced by the amount of the return of capital (subsection 104-135(4)). 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). 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. 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. 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. 4 September 2013. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. Maria must reduce the cost base of her shares by $2,500 to $1,055.80. 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. The ruling applies from 1 July 2021 to 30 June 2022. The ATO ruling, if ITAA 1997 855-10(1) Income tax: Capital management distribution: Wesfarmers Limited . The return of capital will be affected by way of an equal reduction of capital under section 256B of the Corporations Act 2001 (Corporations Act), and requires shareholder approval by ordinary resolution under section 256C of the Corporations Act. ITAA 1936 45B(5)(b) 13. Some of the information on this website applies to a specific financial year. 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? All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. 35. 20. ITAA 1997 Div 197 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. . 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. Distributed by Public, unedited and unaltered, on 08 December 2021 06:41:05 UTC. The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. 38. 67. 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 payment was entirely capital in nature with no dividend component. 43. 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. Under the return of capital, all shareholders were treated in the same manner. ITAA 1997 975-300(3) 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). Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. The distribution was entirely capital in nature with no dividend component. For those employee shareholders who hold their shares within a New Zealand Wesfarmers employee share plan, are tax residents of New Zealand and only work in New Zealand, it is expected the return of capital payment will be treated as dividend income. 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 30. 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). 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 Maria chooses the indexed cost base, she calculates her cost base by multiplying her original cost base by an uplift factor. The capital return has been approved by the shareholders. The term 'dividend' in subsection 6(1) includes any distribution made by a company to any of its shareholders. 75. 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 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). 72. 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. ITAA 1997 995-1(1) He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. 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. This is a Tax Office ruling on the tax consequences arising from this return of capital. 43. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. The ATO has issued Class Ruling CR 2018/59 . 17. 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. How do I provide, update or check my bank account details? 49. 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. Accordingly, section 45A has no application to the return of capital. Make sure you have the information for the right year before making decisions based on that information. 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. For those employee shareholders who hold their shares within an Australian Wesfarmers employee share plan, are tax residents of Australia, only work in Australia and hold their shares on capital account at the time the return of capital was paid, the tax implications of the return of capital are as follows: Following the payment date, Wesfarmers provided Australian participants with a statement that set out the taxation implications of the return of capital payment and where applicable information in relation to any cost base adjustments. 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. ITAA 1936 6(1) 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 return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. 25. ITAA 1997 104-25 For more information on how to work out the cost base and the reduced cost base of shares, see the Guide to capital gains tax. 11. How did the capital return work and what was the effect on the company? ITAA 1936 45B(8) ITAA 1936 47 82. The return of capital will be debited to Wesfarmers share capital account. 37. ITAA 1936 45B 24. 4:00pm (Perth time) Friday, 19 November 2021. The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. 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). As a result of the return of capital, you must adjust the cost base of your Wesfarmers shares. ITAA 1997 Div 115 3. ATO Class Ruling - return of capital to shareholders. The return of capital was considered and approved by shareholders at the 2021 AGM. 58. This amount represents your capital proceeds. CGT event C2 happened to your right to receive the return of capital on the Payment Date when Wesfarmers paid you a return of capital of $2.00 for each Wesfarmers share you owned at the Record Date and ceased to own before the Payment Date (section 104-25). : Yes. Section 45A - streaming of dividends and capital benefits. 11. 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). 4. 22. If the return of capital is approved by shareholders at the 2013 . Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the return of capital. 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. 31. | August 8, 2022 A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its cost base. 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. A CGT event will not happen if a company converts its shares into a larger or smaller number of shares (the converted shares) in accordance with section 254H of the Corporations Act in that: While there is a change in the form of the original shares, there is no change in their beneficial ownership. 8. Note: ITAA 1936 44(1) 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). The discount factor for resident individuals is one-half. Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. 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. ITAA 1997 104-165(3) This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. . In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. Will my shares be worth less after the capital return? 29. You made a capital gain when CGT event G1 happened if the return of capital of $2.00 per Wesfarmers share you received was more than the share's cost base (subsection 104-135(3)). 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). 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. At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. The capital return distribution was paid on Thursday, 2 December 2021. The capital loss is equal to the amount of the difference (subsection 104-25(3)). You will make a capital gain under CGT event C2 if the capital proceeds from the ending of the right are more than the cost base of the right. 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. 65. If Maria uses the indexed cost base for this event, she cannot use the discount method if she sells her Wesfarmers shares later. according to an ATO ruling. ITAA 1936 318 Although a 'capital benefit' (as defined in paragraph 45A(3)(b)) will be provided to participating Wesfarmers shareholders under the return of capital, the circumstances of the return of capital indicate that there will be no streaming of capital benefits to some shareholders and dividends to other shareholders. 62. The return of capital was recorded as a debit to Wesfarmers untainted share capital account. The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). The phrase 'provided with a capital benefit' is defined in subsection 45B(5). The record date for the capital return payment was 4:00pm(Perth time) on Friday, 19 November 2021. This Ruling sets out the income tax consequences for shareholders of Wesfarmers Limited (Wesfarmers) who received the return of capital payment of $2.00 per ordinary share on 2 December 2021 (Payment Date). 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. Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. 60. It is anticipated that shareholder approval will be sought at the AGM scheduled for 7 November 2013. ITAA 1997 104-135 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). 19. AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. 48. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. 30. 5. 2. 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 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. This is clearly marked. 10. 26. 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: Accordingly, if the Wesfarmers share was acquired by the Wesfarmers shareholder at least 12 months before the return of capital was paid, a capital gain from CGT event C2 happening on the ending of the corresponding right may qualify as a discount capital gain under subsection 115-25(1) of the ITAA 1997, provided the other conditions in Division 115 of the ITAA 1997 are satisfied. 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. In particular: 26. The return of capital was not eligible to participate in the DIP. Collectively, shareholders received a total distribution of approximately $1,143 million. '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. Return of capital amount - $5.68 for each entitled WES share. The return of capital demonstrated Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders. What was the capital return?Wesfarmers made a cash payment to shareholders of 200cents per share (or approximately $2,268 million in total). 57. Wesfarmers is an Australian-resident company listed on the Australian Securities Exchange since 1984. ITAA 1936 45B(3)(b) 56. The Payment Date is anticipated to be late November to early December 2013. 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). Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. 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. The return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). 1. The Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. 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. 36. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. 80. There was no dividend component as part of this capital management initiative. How do I adjust the cost base and reduced cost base of my Wesfarmers shares? A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. 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. The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. 47. Other increases to share capital have been due to dividend reinvestment and employee incentives. ITAA 1997 104-25 The return of capital . ITAA 1997 855-30 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. 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. 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). Eligible shareholders received 1 COL share for each WES share owned. As a result, you will, in those circumstances, make a capital gain equal to the capital proceeds, being $2.00 per Wesfarmers share owned at the Record Date. ITAA 1936 45A Accordingly, CGT event G1 will happen when Wesfarmers pays the return of capital to a Wesfarmers shareholder in respect of a Wesfarmers share that they own at the Record Date and continue to own at the Payment Date. 18. ITAA 1997 109-5 It is anticipated that shareholder approval will be sought at Wesfarmers' Annual General Meeting (AGM) which is scheduled for 7 November 2013. She paid $2,200 ($2.20 per share) plus brokerage of $100 - making her cost base $2,300. What are the key dates for the capital return? 65. The cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). During the years ended 30 June 2018 to 30 June 2020, Wesfarmers disposed of a number of assets and received sale proceeds totalling $4.3 billion. 33. Some of the information on this website applies to a specific financial year. The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 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. Make sure you have the information for the right year before making decisions based on that information. 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. Division 230 does not apply to individuals unless they have made an election for it to apply. The summary in these documents and in this section is general in nature and should not be relied upon as advice. purchased their shares after the shares started trading on an ex return of capital basis (i.e., from Thursday, 18 November 2021 onwards), the cost base for each share acquired after 19 September 1985 should be reduced by the return of capital amount (on a cents per share basis) for the purpose of calculating any capital gain or capital loss on the ultimate disposal of that share; and. This is due to the outflow of funds to shareholders. 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